Weekly Rupee View: Rupee sticks to a range

The rupee depreciated against the dollar over the past week as it closed at 83.44 on Tuesday as against 83.34, a week ago. During this period, the dollar was largely flat.

The capital outflows are believed to have put a downward pressure on the domestic unit. Despite the Indian equity market showing some recovery over the past week, the net FPI (Foreign Portfolio Investors) outflows stood at $812 million during this period, NSDL (National Securities Depository Ltd) data showed.

Crude oil prices, which moderated recently, has provided some cushion for the Indian currency. Also, as some experts cite, the RBI might have been providing some support for the rupee in the recent weeks. This is substantiated by a drop in the foreign reserves – it declined from $649 billion on April 5 to $640 billion on April 19.

On Wednesday, the US Fed will be announcing their monetary policy and also, there are other key data from the US like ISM Manufacturing PMI (Purchasing Managers’ Index) and employment numbers to be released. This can have an impact on the dollar which in turn can have an effect on the USD-INR exchange rate.

Fundamentals apart, the chart shows that the rupee is sticking to a range and there is no clarity in the trend.

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Chart

For over a month, the rupee has been fluctuating in the 83.25-83.60 range. For us to get a clue about the next swing in the exchange rate, the rupee should move out of this range.

If the local currency recovers and crosses over the resistance at 83.25, it can appreciate to 83 or to 82.80, which are the notable resistance levels.

On the other hand, if the rupee slips below the support at 83.60, it can decline to 84, a potential support. Subsequent support is at 84.50.

The dollar index (DXY), which has been on a rally since early March, seems to have lost momentum, at least temporarily. The chart shows that this index is now trading between 105.50 and 106.40. The direction of the break of this price band will lend us clues about the next leg of trend.

Outlook

At the momentum, the rupee appears to maintain the range of 83.25-83.60 for some time. But one should have an eye on the Fed policy and the data from the US, which can induce some volatility in the USD-INR currency pair.

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