Rupee likely to be ranged with a bullish bias

Rupee likely to be ranged with a bullish bias

By Dilip Parmar

The Indian rupee registered the first weekly gain in four after the announcement of India’s sovereign bonds inclusion in the JP global bond index and crude oil retreated which rallied more than 40% from the May low. The local currency was the top performer among the Asian currencies, marking gains of 0.3% to 82.94 a US dollar. The outperformance in the local unit may not last long as inflows will knock the market next year and in a staggered manner. While on the other side, the greenback remained in demand against major currencies after a so-called hawkish signal from the Fed in a recent policy meeting.

Outlook

This week will be holiday truncated and September month derivative contracts will settle on Sept.26. We expect spot USDINR to trade within the range of 82.50 to 83.20. The bias is still bullish as it has been holding the bullish sequence of higher highs and lows on the daily frame and held the support of a recent swing low of 82.83. We believe as long as the pair trades above 82.80 one should remain optimistic and breaking it will confirm the trend reversal.

Last week started a bit slow but ultimately the Central Bank’s heavy data calendar of Wednesday and Thursday delivered and a September trend finally arrived with yields up, the dollar up and equities down. The ICE dollar Index rose 0.25% to $105.58 and closed higher for the 10th straight week while the sea of red was seen in global equities. The yen weakened against all of its Group-of-10 currency peers after the Bank of Japan stuck with its ultra-easy stimulus. The British pound lost 1.15% vs. the dollar, the largest one-week percentage decline since Friday, Aug 25, 2023, amid weak economic data and a surprise hold from BoE.

CFTC Position

Net non-commercial (Speculative) accounts have been reducing aggregate short dollar positions steadily in the past few weeks and the Commitments of Traders Report through last Tuesday shows these accounts actually moving to an aggregate net dollar long position ($2.7bn) last week, the first overall bull position among Speculative accounts since last November.

(Dilip Parmar, Research Analyst, HDFC Securities. The views expressed are the author’s own. Please consult your financial advisor before investing.)