The rupee has been stuck in a sideways range between 64 and 65 against the US dollar for about two months now.

Within this range it had strengthened slightly against the greenback in the past week. The rupee touched a low of 64.70 on May 30 and reversed higher from there. It hit a high of 64.29 before closing at 64.36 on Monday, up 0.2 per cent for the week.

The dollar weakening in the past week helped the rupee gain ground. The dollar index (96.74) fell about a per cent last week. Weak job numbers released on Friday may continue to keep the dollar index under pressure this week as well.

Though the unemployment rate fell to 4.3 per cent from 4.4 per cent, the US added just 138,000 jobs against an expected 182,000 in the month of May. Lower revision in the previous two months’ (March and April) job numbers has increased the concerns of a slow-down in US job market. As the job number has failed to meet market expectation, speculation has increased about the US Federal Reserve going slow in the pace of hiking rates this year. The next meeting is scheduled on June 14.

The outlook for the dollar index (96.74) remains negative. It can test the next support at 96.45 in the coming days. A strong break below it can drag it to 96 initially.

Further break below 96 will see the index extending its fall to 95. Such a fall in the dollar index may see the rupee strengthening further towards 64 in the days ahead.

An eventful week This week is packed with a series of important events. It starts with the Reserve Bank of India’s monetary policy meeting on Wednesday (June 7) where the central bank is expected to keep rates unchanged.

Volatility is guaranteed as the market moves towards the end of the week. The UK elections and the European Central Bank (ECB) meeting are on Thursday (June 8).

There is a possibility of some wild swings in the dollar index following these two events. If the dollar gains strength from these events and reverses higher, then rupee can come under pressure.

Rupee outlook The range between 64 and 65 remains intact for the rupee. Within this range, the possibility is high of it strengthening to 64 — the upper end of the range — in the coming days.

Inability to break above 64 can continue to keep the rupee within the 64-65 range for some more time. In such a scenario, the currency can fall once again to 64.50 and 65 thereafter.

But if the rupee manages to break above 64, it can gain momentum.

Such a break can take it higher to 63.85 initially. A break above 63.85 will see the rupee strengthening further to 63.60. Currently, the rupee’s strength is expected to be limited to 63.60 — a key medium-term resistance for the currency.

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