USD/INR Breached The 73.30-70 Trading Range And Looking To Trade Higher

Published 26-10-2020, 03:03 pm

USD/INR opened the week a lot firmer at 73.77 with the upside gap of 15 paise/USD over its Friday’s close. The fall in the global stock indices and the surge in coronavirus cases in Europe and the US posed an upside risk for the currency pair.

The domestic currency touched an intra-day low of 73.87 and ended the day at 73.85. The domestic currency is looking to test the 74.20-30 mark before the end of this week. The rupee has successfully breached the trading range between 73.30 to 73.70 which provoked stop-loss buying from importers and corporates to drive the rupee lower toward the abovesaid level. Exporters are looking to sell their near-term receivables targeting a spot level of 74.00 or lower which should cushion any significant fall in the rupee exchange rate. The FDI and other capital inflows have receded in the last one week time period and the net dollar overbought position in the market has significantly reduced which had resulted in a moderate weakness in the rupee exchange rate.

The European stock indices are trading sharply lower with DAX down by 2.44%, CAC 40 down by 1.16% and FTSE 100 dipped by 0.60% at this point in time. The other European stock indices are now trading lower by more than 1%. Following the trend in the European stock markets, the benchmark BSE Sensex 30 fell sharply by over 1.5% in the mid-session of trading today. The Nifty 50 has broken the 11,800 mark and in the daily chart, it formed a bearish candle.

The analysts are expecting the rupee to have a stiff resistance at 73.50 and support at 74.30 before the US election result. Any weakness in the rupee exchange rate beyond the 74.10-20 level would invite exporter-selling in the market and hence one can expect the rupee’s fall to be limited beyond that level. The uncertainty on the US election result is a discouraging factor to weigh on the rupee. The chances of a US Government stimulus ahead of the Presidential elections looked bleaker and the investors preferred the safety of the greenback.

For the week ended 16-10-20, the forex reserves had risen by USD 3.61 billion which indicates the Central Bank was an active buyer in the market to mop-up the surplus dollar supplies. The portfolio inflows remained robust at over USD 2.3 billion which supported the rupee to maintain its stable range till the end of Friday last week.

The fall in the forward dollar premium by 0.10 to 0.15% per annum across the maturities indicate the position of comfortable rupee liquidity in the market and also outline the possibility of a rupee weakness well over the 74.00 mark and  we expect to see a new trading range in the rupee on the weaker side may well be established in the coming weeks

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