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The rupee seems to be stabilising at around 82.5 against the dollar. On Tuesday, there wasn’t much movement as the rupee closed flat at 82.73 versus the dollar. This is largely due the dollar and the US Treasury yields consolidating over the past week. This trend might continue for some more time.
In addition to this, the foreign flows have been positive in recent days. As per the NSDL (National Securities Depository Limited) data, the net outflows of FPIs (Foreign Portfolio Investors) in October came down to $828 million meaning there was a net inflow of about $372 million over the past week. If there are more inflows in the coming days, it can provide upward pressure on the Indian currency.
The prices of crude oil too have largely been stable over the past week.
Therefore, the rupee might stay sideways but there is a bullish bias which can lift the local currency gradually.
That said, technically speaking, the rupee is now directionless as the charts indicate.
Chart
Last week, the rupee slipped below the support at 82.50 and marked a record low of 83.29, contrary to our expectation of a minor rally. Nevertheless, there was no follow through sell-off and the local currency has recovered to the current level of 82.73. As it stands, 83 seem to be providing good support for the rupee. Yet, on the upside, 82.50 can be a hurdle for rupee bulls. But considering the price action of the dollar index (DXY), the rupee has a good chance to gain ground against the dollar from the current level.
DXY is currently hovering around 112. Over the past couple of weeks, it has been held in the range of 112-114. Notably, the price band of 113.50-114 has been preventing the dollar index from advancing further and so, the daily chart shows that it has formed lower high. So, there is some weakness in DXY, and this can be capitalised by the rupee.
Outlook
Key factors like the dollar index and crude oil are stable of late. On the other hand, the FPI flows over the past week have been encouraging for the rupee. Therefore, even though the short-term direction is uncertain as per the charts, the Indian currency might gain from here. It might get over the hurdle at 82.50 and could move towards 81.75 in a couple of weeks.
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