Weekly Rupee View: INR breaks out of a barrier 

Over the past week, the rupee (INR) has made good gains against the dollar (USD). Although the local currency closed almost unchanged on Monday, the bias appears to be positive. On Monday, it closed at 81.92. The local currency has gained 1 percent year-to-date against the dollar. Thus, it is one of the best performing Asian currencies so far in 2023.

Supporting the rupee, foreign inflows were good in March. According to NSDL data, net inflow in March stood at $1.1 billion. Also, the dollar, facing resistance, was unable to extend the uptrend in the past few sessions. The Indian currency was also supported by a rebound in the local stock market. As it stands, further appreciation in the rupee seems very likely.

Schedule

The rupee breached the range of 82.40-83 at the end of last week. It hit a one-month high of 81.62 on Monday before closing slightly lower at 81.92. While the INR may drop to 82 or 82.10 from the current level, we expect it to regain its strength and move towards 81 in the next two weeks. After reaching 81, we may see a slight decrease.

But if the Indian unit crosses 81, it can rise to 80.50 or 80, which are the resistance levels noted above 81.

Dollar Index (DXY) struggled to breach the resistance level of 105.20 and broke out from this level. It is currently trading around 104.50. The price action indicates that the DXY may remain flat in the coming week. It may continue to fluctuate between 103.60 and 105.20 in the short term.

prospects

While there are chances for the rupee to see slight moderation from the current level, weakness could be limited to 82 and 82.10. Overall, the bias is positive and we expect the Indian currency to rise towards 81 against the dollar in the near term.