Weekly Rupee View: INR flat ahead of the Fed policy

Akhil Nallamuthu |BL Research Bureau | Updated on: Sep 20, 2022

Key levels to watch out for are 79.25 and 80

The rupee (INR) is largely directionless against the dollar (USD) for about a month now. The dollar’s strength is capping the upside for the Indian currency and on the other hand, the robust foreign inflows and the possible intervention by the Reserve Bank of India (RBI) is providing good buffer. On Tuesday, the local unit closed almost flat at 79.76

The latest NSDL (National Securities Depository Limited) data shows that the net FPI (Foreign Portfolio Investors) inflow this month so far stands at a little over $2 billion. Half of this came in the past week. The decline in the foreign exchange (FX) reserves indicates that the RBI is supporting the rupee. The FX reserves has shrunk to $550.87 billion as on September 9, a drop of $2.2 billion, the latest RBI data shows.

This week, the focus is on the US Federal Reserve, as it is set to announce the policy decisions as well as the economic projections on Wednesday. Post its policy announcement, we can expect some volatility in the exchange rate of USDINR on Thursday. Until then, the INR might witness little movement against the greenback. The charts also indicate a lack of trend.

Chart

Even though the rupee moved up and down in the last couple of weeks, it has remained within 79.25 and 80. Unless either of these levels are breached, the next swing in the exchange rate will remain uncertain. Probably, the Fed event could take INR out of this range. Resistances above 79.25 are at 79 and 78.50 whereas supports below 80 are at 80.25 and 80.50.

The dollar index has also been charting a sideways trend, i.e. it has been oscillating in the price band of 109.30 – 110. The short-term trend therefore stays uncertain. The nearest support below 109.30 is at 109 and the immediate resistance above 110 is at 110.70.

Outlook

Contrary to our expectation of rupee strengthening to 78.50, it had largely remained flat over the past week. It is expected to remain so until the policy announcement of the Fed. Technically, USDINR is range-bound and until it break out, the next leg will remain uncertain.

Published on September 20, 2022
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