core sector communique

Rupee ambling around the 50 mark

Rupee hovered around the 49 mark against the dollar last week as financial markets enjoyed a brief period of calm. But the lull did not last long, and fears of Greece default resurfaced after the Finance Ministers' meet began mulling private sector involvement in the bail-out. Goldman Sachs Group cutting its global growth forecast and predicting recession for Germany and France did not help the situation.

Rupee jerked towards 49.5 as stock prices nose-dived and FII selling intensified this week. The dollar index shot higher to 79.8 buoyed by investors moving their funds in to safer assets. Subsequent resistances for this index are at 80.7 and 82.6. If this index gets past 82.6, next resistance is at 88.7.

Dollar-rupee outlook: Rupee recorded the recent peak at 48.6 on September 28 before moving southward again. That the rupee could retrace only 30 per cent of the recent leg of its down-move implies that the short-term view remains negative and the Indian currency can move below 50 after spending some time in the range between 48.3 and 50. Medium-term targets on such a break lower are 50, 50.9 and 51.9.

The negative outlook will be mitigated only if the currency goes on to close above 48.3. Next critical resistance is at 47.6.

USD-INR futures: Moved in line with our expectation, vacillating in the range between 49 and 50. Though the contract is struggling to move above the 50 mark, the short-term trend remains up. Traders can buy in declines with stop at 48.8. Targets on a break above 50 are 50.4 and then 51.5.

Key supports for the short-term would be at 48.9, 48.6 and 48.3.

EUR-INR futures: Declined sharply from the peak of 67.1 recorded on Thursday. It is currently poised at the key short-term support at 65.4. Decline from this level will take the contract down to 64.8 or 64.2. Short-term traders can initiate fresh shorts on a sharp close below 65.2.

GBP-INR futures: Reversed lower after recording the peak of 77.2 on Monday. Immediate supports for the contract are at 75.9, 75.4 and 75. Traders can buy the contract if it reverses from the first support. Targets are then at 77.2 and 78.3.

JPY-INR futures: Moved sideways with a bearish bias over the past week. Supports for the upcoming sessions are at 63.2, 61.8 and 59.4. Traders can hold their long positions with stop at 63. Short-term resistance will be at 65.5.

- Umesh Shanmugam