The ongoing US government shutdown and the debt ceiling concern are keeping the dollar under pressure. This has helped the rupee to break its 62-63 range. The Indian currency gained 1 per cent in the past week to close at 61.79 against the dollar on Tuesday.

The RBI, on Monday, reduced the marginal standing facility (MSF) rate by 50 basis points to 9 per cent to improve liquidity conditions. But , this move did not have any positive impact on the currency. In the absence of any data release from the US because of the shutdown, the currency market will take cues from India’s trade data release on Thursday, which will be followed by the industrial production data on Friday and the Wholesale Price Inflation data next Monday.

Foreign institutional buying $393.9 million in equity in the past week helped the sentiment in currency market. However, the outflow in debt continues. FIIs sold $ 697.3 million of debt over the past week.

DOLLAR INDEX

Dollar index continued declining. The index has critical supports at 79.6 and then at 79. These supports can be tested well ahead of October 17, the deadline to increase the debt ceiling. The index has key medium-term support at 79. Breach of this level can drag the index to 77 or 75.

DOLLAR-RUPEE OUTLOOK

The short-term outlook is positive for the rupee. Immediate support for the currency is in the 62.5-63 zone. Failure to breach this zone can keep the currency moving in the range of 61.2 and 63 for few more weeks. The short-term view will turn negative only on decline below 63. Subsequent targets are 64.1 and 65.Resistances for the rupee are placed at 61.2 and 60.5.

For the medium term, 60-59 is a critical resistance region for the rupee which might not be breached easily. As such the rupee might not rally above 59.

Related Topics