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On Tuesday, the rupee (INR) opened with a gap-up but was largely flat for the day, closing at 75.99 against the dollar (USD). Thus, it has inched up from 76.18 a week ago. A drop in crude oil prices on the back of demand concerns provided some relief for the local currency. At the time of writing , the Brent crude futures was trading at around $104 a barrel compared to last week’s close of $120.65, losing nearly 14 per cent. Also, the corporate dollar inflows for year-end adjustment have helped INR to some extent.
However, Ukraine war and the FPI (foreign portfolio investors) continuing to sell, though at a slower pace, remain as a risk for the rupee. The net outflow in March, according to latest NSDL (National Securities Depository Limited) data, stood at $6.54 billion. Thus, the net outflow year-to-date is now at $15.43 billion.
Charts
The rupee, closing at 75.99 on Tuesday, remains within the range of 75.75 and 76.75. Nevertheless, the INR might see some positivity this week. That is, the possibility of it rallying above 75.75 is high. In that case, it can appreciate to 75.50 - the next nearest hurdle. A rally above this level can take it to 75.15. On the other hand, if INR slips below 76.75, it might weaken to 77 initially and then touch 77.20 eventually.
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A weak American currency in the overseas market also helped the domestic unit, forex traders saidThe dollar index (DXY) too continues to tread in a sideways path. Currently trading at 98.30, the index stays in the range of 97.70 and 99.40. Therefore, a lack of trend in dollar can also be a major reason for the rupee to largely staying flat. A breakout of 99.40 can lift DXY to 100 quickly whereas a breach of 97.70 can drag it towards the support band of 97.25 – 97.00.
Outlook
Ukraine war continues to be a risk and the FPIs do not seem to have changed their stance of selling, despite the equity markets recovering this month. That said, the charts show that INR is trading within the range of 75.75 and 76.75 but looks to be developing some positive bias. However, we retain our last week’s recommendation of staying out of the market until a clear trend emerges.
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