Buy Indian rupee on dips, advises Karvy

Karvy's research report on currency -

The euro continued its downtrend from yesterday, trading at 1.2842. The dollar significantly extended its gains from last night, trading at 84.372. Federal Reserve chairman Ben Bernanke supported the QE-3 in his testimony which supported the market sentiment. However, during the Q&A session, Bernanke said that the FOMC may be scaled back after signs of economic recovery become apparent, this created pessimism in the market and supported the dollar. Asian equities are trading down, tracking the bearish tone of the US markets. This may lead to continued weakness due to China’s lower PMI manufacturing data. This may reflect on the rupee. In the afternoon, Europe and Germany will release their PMI numbers which are expected to improve and could support a recovery in the euro, pressurizing the dollar against the rupee. Economic data from the US is likely to show improvement and support the dollar’s gains. Overall, we expect the rupee to stay on a marginally weaker note today.

Also Read:Indian rupee at new 6-month low; refiner sells dollars

USD/INR Spot
The dollar-rupee pair inched higher on Wednesday, closing at 55.6125, gaining 0.14 paisa or 0.26 percent. The pair tested the crucial resistance level at 55.74, retracing sharply after. The supports are at 55.40 followed by 55.32. The resistances are at the 55.74 level, followed by the 55.87 level. The RSI momentum indicator is currently at 69.11 on the daily charts, an indication that the pair could be entering the overbought zone. However, as long as the pair manages to make higher highs and higher lows on a daily basis, there is no imminent danger to the prevailing trend. Hence, we expect the pair to trade in the range of the 55.80-55.40 levels. We recommend buying on dips.

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