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Weekly Rupee View: Rupee remains in range

Weekly Rupee View: Rupee remains in range

The Indian rupee (INR) on Tuesday closed down by 10 paise at 78.08 against the dollar (USD). Though there has not been any major price movement in the past one week, the rupee was one of the strongest Asian currencies so far in June, falling 0.45 per cent. The INR is only behind the Chinese Yuan and the Hong Kong Dollar. The fall in crude oil prices over the past few weeks is a favorable factor for the rupee. Currently at around $115.8 a barrel, Brent crude is down about 8 percent from its recent peak.

Despite this, there has been no appreciation in the rupee. Unrestrained selling by Foreign Portfolio Investors (FPIs) weighed on the local unit. According to the latest available data from NSDL (National Securities Depository Ltd), the net outflow stood at $5.2 billion in June, taking the net outflow for the year so far to $28.4 billion. This is the main reason for the rupee to remain weak despite the dollar being weak in the last one week.

The rupee has depreciated 5 per cent year-on-year against the greenback.

Chart

For the past one week, the rupee is moving in a range of 78-78.10. The INR should move out of this range to give us an idea of ​​which direction the next trend can be established. But note that the overall trend has been bearish and the recent weakness in the dollar has not lifted the domestic currency. Hence, the upside may remain restricted to 77.70 or 77.50. Below 78.10 it may come down to 78.30 and possibly 79.

The dollar index (DXY), after hitting a new multi-year high of 105.8 last week, is back at its current level of 104.1. While the overall trend is bullish, recent price action indicates that the DXY is likely to remain sideways for some time, perhaps between 103 and 105.

Outlook

The near-term outlook is unclear as the rupee is currently stuck in a tight range. At the same time, the dollar index is indicating a possible strengthening. Therefore, the USDINR currency pair is expected to stay in a range possibly between 77.80 and 78.10 in the near term. That said, the overall trend of the rupee is bearish and the chances of INR breaking the 78.10 support level are high.

Published on

21 June 2022

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Weekly Rupee View: Rupee remains in range

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