The rupee continued to stay strong — above 67 last week. The currency made a low of 66.78 on Monday and strengthened to record a high of 66.43 before closing at 66.46 on Wednesday, up 0.8 per cent for the week.

The domestic currency has taken the market by surprise as it has strengthened despite broader equity benchmark indices falling over a per cent last week.

The data on foreign inflows also do not explain the reason for the rupee’s recent up move. Foreign Portfolio Investors (FPIs) have bought $382 million in the debt segment and $198 million in the equity segment over the last one week.

When compared to the trend seen in the past few weeks, these inflows are not particularly strong to drive the rally in the rupee. The rupee has strengthened from 67.14 to 66.43 over the past week.

Though reports suggest that banks and exporters are selling the green back, the real reason for a stronger rupee remains unclear.

Also, the dollar has more or less remained stable over the last one week, though inching up from Monday’s lows to 95.6.

Data watch

The coming week is packed with a series of important data releases both in the domestic as well as the global front.

From the US, a strong GDP numbers today would once again raise hopes of a rate hike from the US Federal Reserve in November. This can strengthen the dollar and in turn may halt the rupee’s rally.

On the domestic front, the fiscal deficit data is due for release on Friday and Nikkei India Manufacturing Purchasing Managers’ Index (PMI) on Monday . These will be followed by the Reserve Bank of India’s monetary policy meeting on Tuesday (October 4).

This will be the first policy meet from the new Governor Urjit Patel and the market will keenly await its outcome.

On the charts, the short-term outlook continues to remain positive for the rupee. A key support is at 66.65.

Rupee outlook

The rupee may lose ground if it breaks below 66.65. Such a break can take it lower to 67 or even 67.20.

The level of 67.2 is a significant short term support for the rupee.

A strong break below 67.2 may increase the possibility of a fall to 68 or even lower levels thereafter. But such a strong fall in the rupee looks less likely at least in the near- to short-term.

On the other hand, if the rupee manages to sustain above the immediate support level of 66.65, it can strengthen to 66.30 in the near-term. A break above 66.3 can take it higher to 66 in the short-term.

As being reiterated in this column over the last couple of weeks, 66 will be a trend deciding level.

If the rupee manages breach this hurdle at 66, it will turn the medium-term outlook bullish for a rise to 65.

But, a reversal from 66 can see the rupee weakening to 66.5 and 67 once again. Such a reversal may keep the currency inside the 66-68 range over the medium-term.

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