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Over the past week, the rupee remained flat against the dollar and closed at 53.78. The rupee might have closed the week in the red, but for the 0.26 per cent gain registered on Tuesday following the RBI’s move to cut both the repo rate and the Cash Reserve Ratio by 25 basis points. The rupee also gained 0.35 per cent against the euro on Tuesday. But over the week, the rupee still ended 0.54 per cent lower against the euro to close at 72.23. Improving economic sentiment in the Euro Zone with moderation of bond yields in Italy and Spain helped the euro gain 0.8 per cent against the US dollar over the week. A euro currently trades at 1.3428 dollars a piece. Meanwhile, the dollar index at 79.82 closed almost flat.
On the domestic front, the authorities took steps to support the rupee. The government raised import duty on gold and platinum from 4 per cent to 6 per cent to curb the current account deficit. The RBI raised by $5 billion each FII investment limit in government securities and corporate bonds. It also allowed exporters to tap the forex market before exhausting their foreign currency accounts. The Finance Minister, meanwhile, toured global financial hubs, to improve confidence about the Indian economy. FII flows remained strong over the week (above $2.5 billion).
Dollar rupee
The USD-INR pair is stuck in a range between 53.5 and 54 over the past week. There is a short-term hurdle at this level since it occurs at 50 per cent retracement of the decline from the October high of 51.4.
Downward reversal from these levels will pull the pair towards 54.3 or 54.9 in the weeks ahead. Traders need to watch out for the support around 54.3. Short-term view will stay positive as long as the currency trades above this level.
The medium-term trend in the rupee however continues to be down. The pair will have to record a close above 53.1 to make the medium term view positive.
Euro Rupee
The Euro-Rupee pair has, however, been holding near its life-time lows hit at 73.4. The rupee continues to be weak against the European currency unit. If we extrapolate the move that began from the May 2010 low, decline below the recent low at 73.4 gives us the next target at 80.4.
Outlook for this currency pair will stay negative as long as it trades below 69.6.
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