The Hindu Business Line : Rupee in short-term decline

Volatility in rupee increased on Tuesday ahead of the monetary policy review in anticipation of tightening measures by the Reserve Bank of India. Despite the central bank leaving key policy rates unchanged, the currency plummeted to 47 on fears of foreign institutions pulling out funds from Indian stock markets as stocks nose-dived.

Dollar recovered against major currencies on Monday as risk aversion returned to global financial markets. Dollar index traded on Intercontinental Exchange recovered from the low of 75.08 to spike to 76.2 by Monday. Excessive short build-up in the greenback is expected to help the currency pull back higher as these short positions are squared. Immediate resistance for the dollar index is at 77 where the 50-day moving average is positioned.

One-month view

Rupee is reversing lower from the resistance zone between 45.5 and 46. It is a little early to judge if the rally from 49.2 has ended or if the current decline is a temporary pull-back. If the decline witnessed since October 15 halts between 47 and 47.5 then the currency can oscillate between 45.5 and 47.5 for a few more weeks.

A decline past 47.5 will take the currency to the key support at 47.9. The currency needs to decline below this level to signal that a more serious down-move is developing.

Five-day view

Rupee can attempt to decline to 47 or 47.4 in the near-term. But presence of strong support at these levels can cause a rebound to 46.5 or 46.2 again. A sideways move between 46.2 and 47.4 seems likely in the short-term.

Supports – 47, 47.4, 47.9

Resistances – 46.5, 46.3, 45.7

Lokeshwarri S.K.

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