Daily Dollar Rupee | 6th Aug ’203 min read

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The Dollar lost its ground further, and risk assets rallied, as markets absorbed patchy US economic data as an indication of further stimulus to be announced even as US lawmakers negotiate over the finer details of the new stimulus package.

The dollar’s brief respite from continued selloff in past few weeks was short lived, as price faced resistance and reversed from the long term upward trendline as noted in above chart. Currently, DXY is drawing some support around 92.70 levels, a break of which can take it to sub-90 levels. This could mean further appreciation for EM currencies including the Rupee, depending on the stance of the RBI on interventions.

After moving below key levels: 75.0 and 74.95, the 23.6% retracement level of move from 68.8 – 77 in the previous session, USD/INR opened around 74.80 levels and moved higher to trade close to 74.90 currently. 74.95-75.0 zone should provide resistance in case of an attempt to break higher. However, given the general risk-on mood in the market, and continued Dollar weakness, the odds of the Rupee staying flat / lower than 75.0 levels seems to be more likely.

If the dollar stays weak and the strengthening move continues in the Rupee, supports can be expected at 74.66, 74.50 levels, which have previously acted as key turning points for price.

Looking at intraday levels for USD/INR, Spot opened around 79.80 and moved higher than both the hourly and 25-min Pivot levels in early trading. 74.97, 75.01 are next resistances on the upside, while 74.85, 74.80, 74.70 can act as support levels.

On the domestic macro front, market will be keenly watching outcome and commentary from the RBI MPC meet to be concluded today. Market is evenly split on a rate cut, with one half camp expecting a 25bps cut while others expect no change. More importantly, any announcement on debt restructuring measures to alleviate concerns of lenders while the moratorium expires will be taken a note of. If markets perceive the measures to be positive, Indian equity markets could gather momentum and FII inflows lead to further strength in the Rupee.

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