Mr. Sriram Iyer, Senior Research Analyst at Reliance Securities
The Indian Rupee ended flat against the U.S. dollar this week, as persistent dollar demand from importers offset the impact of strong local equities.
The Rupee ended at 73.48 compared with 73.52 in the previous session.
For the week, the unit traded in a 73.30 to 73.80 range. It had depreciated by 0.7% last week.
Throughout the week, the markets witnessed dollar buying by oil companies and importers, but at the same time, we also witnessed corporate inflows and exporter covering which kept the rupee in a 50-paisa trading range.
Meanwhile, in the overseas markets the dollar was on its way to end a 2nd week with consecutive gains.
Data was mixed this week. Initially, U.S. inflation remained subdued creating uncertainty about the timing of the Federal Reserve's tapering of its asset purchases.
However, U.S. retail sales unexpectedly increased in August, easing some concerns about a sharp slowdown in economic growth and bolstered investor expectations for next week's Federal Reserve policy meeting and how soon the U.S central bank will start to taper stimulus.
Looking ahead, the Rupee could continue to remain range bound over the next few sessions or at least till clarity emerges from the Fed meeting next week.
The Fed meeting is on 21 and 22, and unless there is a Fed surprise Rupee's range is unlikely to change going into the FOMC meeting next week.
While we believe that the tapering announcement is unlikely until the November FOMC meeting, the September meeting will introduce the staff forecasts, or 'dots plots' for 2024. A poll suggests that the 2024 dots could mirror 2023's two rate hikes.
Anything more hawkish than 2 rate hikes will be negative for the local unit and could test 74.00 levels very soon.
So, for now, heading into the next week, we could continue to witness some more range bound price action for the local unit.
Apart from the FOMC meeting, the important macroeconomic data releases next week are Building Permits, Housing starts, Existing and New Home sales numbers from the U.S.
Back home no major data is expected to be released, so all eyes will be on the Fed meeting.
On the charts, the USDINR Spot pair could see sideways momentum where resistance is at 73.90-74.10 levels. Support is at 73.25-73.00 levels.
The USDINR Spot pair could trade in a range of 73.10-73.95 levels in the coming week.
In the overseas markets, technically, the Dollar Index above $92.30 level could see a bullish momentum up to $93.15-$93.50 levels. Support is at $92.30-$91.95 levels.
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