The Hindu Business Line : Soaring crude price impacts rupee

Rupee recorded a dramatic decline on Tuesday that took it within arm’s reach of the Rs 41-mark. Strength in the dollar following a quarter per cent cut in US interest rates did little to affect the sentiment towards the rupee. It is once more the demand from oil importers that is the prime cause for this weakness. Re-surfacing geo-political tensions in Iran and supply disruption from Nigeria made Nymex crude prices jump beyond $120, which in turn, pushed the demand for dollars from Indian oil importers higher. Tepid inflows from overseas in to the equity markets is cited to be the other reason behind the rupee’s decline.

1-month view

The continuing weakness in the rupee corroborates our view that the USD-INR pair is charting the third wave up from the trough at Rs 39.02 formed in January. The targets given last week were Rs 40.71 and then Rs 41.4. It is obvious that the currency pair is on course to achieve our second medium term target. If we expand the picture and consider the long-term charts, we are currently working with the assumption that the up-move from Rs 39.02 (January 2008) is a pull-back rally in the down trend that is in motion since May 2002. As per this assumption, the up-move can face hurdle at Rs 41.4 or Rs 42.

5-day view

The USD-INR pair achieved our near term target of Rs 40.83 to record a peak at Rs 40.98 on Tuesday. The sharp increase in the currency pair over the last six sessions has taken the momentum indicators in the daily chart to the overbought zone. The short-term up trend can extend a little further but there could be a mild bout of profit booking as the currency pair nears the psychological Rs 41 mark. If this level is surpassed, subsequent targets are Rs 41.12 and then Rs 41.4. The near term trend will stay positive as long as the currency pair holds above Rs 40.4, where the short-term trend line is positioned.

Supports – 40.58, 40.45, 40.35

Resistances – 41.00, 41.12, 41.53

Lokeshwarri S.K.

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