The currency market is witnessing muted movement despite a series of encouraging economic data releases in the past week. The rupee, stuck between 62 and 63 to the US dollar for more than two weeks, closed at 62.36 on Tuesday.
On the macroeconomic front, data released in the past week were positive. The Indian economy grew at a higher-than-expected 4.8 per cent in the September quarter. The HSBC India Purchasing Managers’ Index (PMI) rose to 51.3 in November from 49.6 in October, indicating that the manufacturing sector is returning to the growth phase.
The current account deficit (CAD) shrank to $5.2 billion in the September quarter as against $21.8 billion in the June quarter.
For the first time since June, foreign institutional investors (FIIs) turned net buyers of debt on a weekly basis. They bought $4 million in debt and $205 million in equity last week. The rupee could get support if the momentum of inflow into debt increases in the coming weeks.
DOLLAR-INDEX The dollar index is stuck between 80.5 and 81.5 since November. A bullish break above 81.5 can take the index higher to 82 immediately and to 83 thereafter. On the other hand, a decline below 80.5 can drag the index lower to 79.8. A series of important economic data releases are due this week from the US. This could set the trend for the dollar index.
DOLLAR-RUPEE OUTLOOK In the immediate near-term (at least for the week), the rupee could remain between 62 and 63. The market would likely wait to see the US non-farm payroll numbers, due this Friday. For the short-term, the rupee can move in the 61-64 range. Breakout on either side of 61-64 will decide the trend thereafter. Decline below 64 will take the currency lower to 65 and 66 once again. On the other hand, if the rupee breaches 61, then it can strengthen to 59 and 58. But, at the moment, the probability for the rupee to strengthen beyond 61 seems very less.