The Hindu Business Line : Short-term strength in rupee

The rupee strengthened to 47.8 as the dollar plummeted to a low of 76.2 last Thursday. But as the greenback stabilised, the rally in rupee too halted and the currency has been moving sideways between 47.8 and 48.3 over the last four sessions. Over $1 billion of FII inflows in the last five sessions have lent support to the currency while dollar demand from importers is exerting downward pressure.

Dollar rose slightly towards the end of last week. The US currency appears to be biding its time prior to the Federal Reserve Open Market Committee meeting scheduled this week. The US Government’s stance regarding rolling back the stimulus spends and policy rates will determine the future trajectory of the dollar. The trend in the dollar index is extremely weak and a close below 76 will pull the dollar index towards its April 2008 low of 71.

One-month view

We retain the medium-term range between 46.5 and 50 for the rupee. But the movement over the past few sessions suggests that a three-legged down-move move from the June 2 peak was completed at 49.2 on September 2. The currency is now in an up-move that can extend to 47.6 or 47. Weekly close above 46.7 will suggest that the rally is likely to extend to the next target of 45.8.

The medium-term supports for the rupee are at 49 and 50. A strong breach of the 50 level is needed to make the medium-term outlook overtly negative for the currency.

Five-day view

Short-term trend in rupee is currently up. There is a strong psychological resistance around 48, where it is currently poised. If the currency moves beyond this level, next targets would be the August 4 low of 47.1. Supports for the forthcoming sessions would be available at 48.4 and 48.8.

Supports – 48.4, 48.8, 49.2

Resistances – 47.6, 47.4 and 47.1

Lokeshwarri S.K.

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