The Hindu Business Line : Rupee to move in a range

Rupee could not rally emphatically above the 47 mark against the dollar as ambling equity markets and strength in US dollar impeded its progress. Intervention by the RBI in forex markets around the 47 level was also partially responsible for preventing a sharp rally. Foreign institutional investors continued to plough in money in to Indian equities lending support to the currency. The tally for June is $728 million thus far.

Dollar strengthened against most currencies towards the end of last week as expectations of an interest rate hike by the Federal Reserve caused funds to flow back in to dollar denominated instruments. The US dollar index that tracks the movement of the dollar against six major currencies, reversed from 78 and moved to 81.5 on Monday. A rally above 81.8 will take this index all the way to 84.

One-month view

As we have been reiterating, the Indian currency has strong long-term resistance in the band between 46.5 and 47. We expect the rupee to reverse from this zone and decline towards 50 again over the medium term. But if there is a rally beyond 46, next resistance based on Fibonacci retracement levels is 45.6

Five-day view

Rupee has been moving in a range between 46.5 and 48 since May 25. It can continue to move in this band for a few more sessions as the rally from 52.1-peak terminates. Strong support for the near term is around 48. The outlook for the near term will stay neutral as long as rupee stays above this level. Support above 48 is at 48.9.

Strong resistance would be in the band between 46.8 and 46.3. Target above this band is 45.7.

Supports – 47.9, 48.1, 48.9

Resistances – 46.8, 46.3, 45.7

Lokeshwarri S.K.

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