The rupee was down over the past week against the dollar as it closed at 83.32 on Tuesday versus 83.19 a week ago.

The Indian currency slipped despite strong foreign money inflows. As per NSDL (National Securities Depository Limited) data, the net FPI (foreign portfolio investors) inflows over the past week stood at nearly $1.3 billion.

The weakness in the rupee was largely on the back of the dollar, which posted some recovery after a fall. Nevertheless, the fundamental factors remain favourable for the rupee and so the weakness can be limited. Below is the analysis based on the charts of the rupee and dollar index (DXY).

Chart

Although the local currency has softened over the past week, it remains within the 83–83.50 range. INR has been oscillating within this price band for a little over four months. Until the rupee gets out of the above-mentioned range, the next leg of the trend will remain uncertain.

If the rupee breaks out of the hurdle at 83, it can move up to 82.65 or even to 82.50. On the other hand, if the Indian unit slips below the support at 83.50, it could witness a quick fall to 84, a potential support. Below this, 84.25 can offer support for the rupee.

The dollar index (DXY) has recovered from the low of 100.62 that it made last week. It is now hovering around 101.60 and shows potential for an uptick to 102 or even to 102.70. Such a move can weigh on the rupee. However, if the capital inflows remain strong, it can prevent a decline, effectively keeping the rupee within the 83–83.50 range.

Outlook

While the FPI inflows can give the rupee an upward thrust, an extension of recovery in the dollar can weigh on the Indian currency. Over the next week, the likelihood of 83 or 83.50 levels getting breached is low. So, expect INR to continue trading in the range.

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