The rupee (INR), which closed at 83.51 on Tuesday, has barely moved against the dollar (USD) over the past week. Down by about 0.4 per cent year-to-date, the Indian currency remains one of the best performing emerging market currencies since it has largely traded within a range.
The local unit remained flat over the last week despite substantial capital outflows. According to data from NSDL (National Securities Depository Ltd), net FPI (foreign portfolio investors) outflows since last Tuesday (May 7) stand at a little over $2.5 billion.
INR was supported by a soft dollar and crude oil prices that have declined over the past month. Brent futures have lost nearly 8 per cent since mid-April.
The CPI (Consumer Price Index), which increased 4.83 per cent y-o-y for April, was little changed, compared to 4.85 per cent in March. But the WPI (Wholesale Price Index) increased 1.26 per cent y-o-y in April, as against 0.53 per cent in the preceding month. Nevertheless, it did not have an impact on the USDINR exchange rate. That said, the US will release its CPI data on Wednesday, and this could influence the exchange rate.
Fundamentals aside, the rupee chart shows that the unit has been held in a range against the greenback and at the moment, there are no signs of it moving out of the band. Below is an analysis of the chart.
Chart
The rupee has been fluctuating in the 83.25-83.60 range for about three weeks now. The recent candlesticks on the daily chart continue to show indecisiveness. Therefore, the probability for the range to stay valid is high.
In case INR appreciates and breaks out of 83.25, it can rise to 83 and then possibly to 82.80. But if it slips below support at 83.60, it might depreciate to 84, a support. Subsequent support is at 84.50.
The dollar index (DXY), currently at 105.20, is trading above the key support at 105. We expect movement only after the US releases the inflation print. The notable support levels below 105 are at 104.50 and 104. On the other hand, the barriers are at 105.60 and 106.40.
Outlook
As it stands, there are no signs of the rupee getting out of the 83.25-83.60 price band. Nevertheless, one ought to watch out for US inflation data, which can trigger a movement on either side.