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The rupee (INR) was flat against the dollar (USD) through last week. It wrapped up Tuesday’s session at 83.3875. INR was flat despite considerable foreign inflows. According to the NSDL (National Securities Depository Limited) data, the net FPI (Foreign Portfolio Investors) inflows stood at $2.5 billion over the past week. The flat movement was largely due to the consolidation in the dollar.
But this might not be the case going ahead as there are few key data that would be released through the week.
India’ CPI (Consumer Price Index) inflation, released on Tuesday, stood at 5.55 per cent in November, a tad lower than the expected 5.7 per cent. Since the number is almost near the anticipated level, it may not have an effect on the Indian currency on Wednesday.
The US Fed is set to announce their policy decisions and release the economic projections on late Wednesday evening. Besides, the trade balance data, which would be released post market hours on Friday, could impact the exchange rate of USD-INR next week.
Chart
The events mentioned above could drive the rupee out of the 83-83.45 range. If the local currency slips below the support at 83.45, it might see a quick decline to 84, a potential support. Subsequent support is at 84.50.
On the other hand, if the rupee rallies from the current level and breaks out of 83, it could appreciate to 82.60 or even to 82.25. But as it stands, the direction of the next leg of trend remains uncertain.
The dollar index (DXY), which rallied over the past couple of weeks, hit a resistance between 104 and 104.30. The upswing lost momentum. The chart indicates that DXY could remain sideways between 103 and 104.30.
If the Fed actions trigger a movement, it will reflect in the USD-INR currency pair too. So, participants should keep a tab of the events this week.
Outlook
As it stands, the horizontal trend in the rupee remains valid. So, the next swing in price remains uncertain and it largely depends on the outcomes of the events. So, participants should be cautious as we might see some movement in the USD-INR currency pair.
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