Comments
The rupee (INR) is now below an important level of 83.30 versus the dollar (USD) as it closed at 83.3850 on Tuesday. The local currency has slightly dropped over the past week. Even as the domestic equity market has hit new highs, INR continues to trade near its lifetime low.
According to market participants, the demand for dollars from oil and gold imports is acting as a downward pressure on the Indian currency. However, softening inflation and strong fund inflows are supporting the rupee and preventing a sharp depreciation.
According to the latest NSDL (National Securities Depository Limited) data, the net FPI (Foreign Portfolio Investors) inflows for December is now at $1.9 billion. The inflation has dropped to 4.87 per cent in October compared to 7.44 per cent in July.
However, if the dollar recovers from the current level, it can have a negative impact on the Indian unit. The rupee’s chart is showing a bearish bias as the exchange rate is now below 83.30.
Read more: Currency Outlook: Dollar: More room for weakness
Chart
The rupee seems to be finding support at 83.45 after slipping below 83.30. On the back of this, if INR recovers and moves above 83.30, it can extend the upswing to 83.20 and then to 83. A breakout of 83 can turn the short-term trend bullish.
But if INR falls below 83.45, we might see a quick decline to 84. This could even extend to 84.50.
Although the dollar index (DXY) made a low of 102.57 last week, it closed the week at 103.27. Expectedly, DXY has held up to the support at 103. As per the chart, the nearest support and resistance are at 102.50 and 104 respectively.
The price action indicates that the dollar index might oscillate within 102.50 and 104 in the near-term. This also can lead to the rupee remaining sideways. That said, if DXY recovers beyond 104, it can weigh on INR and drag it to 84 swiftly.
Outlook
Despite moving below the support at 83.30, the rupee remains sideways. Going by the potential consolidation in the dollar over the next week, INR can be expected to stay within 83.20 and 83.50.
But one should be watchful of the dollar as a recovery in it can weigh on the domestic currency.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.