The Rupee's winning streak since the beginning of the calendar finally reversed last week, with the currency losing 1.4 per cent against the dollar to close at 49.37 on Tuesday. Against the Euro too, the INR shed 1 per cent, to close at 65.13. With the Greek government finally agreeing to the conditions pertaining to its bailout package, the Euro received a further boost. It gained 0.3 per cent against the greenback over the last week and currently yields 1.32 dollars per unit. The Dollar Index meanwhile stayed below the 80-level at 79.05.
Despite FIIs continuing to invest in the Indian market last week (more than $800 million in equity and $300 million in debt) and the Sensex gaining 244 points, the rupee gave up some of its earlier gains.
However, it is still above the important 50-level against the dollar.
The weakness in the rupee has been attributed to increased demand for dollars by importers, including the oil companies.
Meanwhile, overall imports in January 2012 showed much faster growth (20.3 per cent) compared to the 10.1 per cent growth in exports, putting further pressure on the country's current account deficit position.
Also, there were mixed signals on the economic front. While inflation in January moderated to 6.55 per cent, latest industrial production numbers (for December 2011) showed a dip in growth to 1.8 per cent.
Dollar-rupee technical outlook: The rupee could not move beyond the short-term resistance at 48.6 and reversed lower. The currency faces medium-term hurdles around 49 and then at 47.8. These are 50 and 61.8 per cent retracements of the down-move from the July 2011 peak.
The medium-term outlook will strengthen further only if the rupee makes a strong dash beyond 47.8. Else it could head lower towards 50 or 51. For the upcoming week the currency could find support at 49.7. Sideways move between 49 and 49.7 is possible for a few sessions. Target on move below 49.7 is 50.3.
USD-INR futures contract recorded the peak at 49.9 on Friday and then turned volatile.
The contract faces strong resistance in the zone between 50 and 50.1. Fresh long positions are advised only on move above this band. Next upward target would be 51. Supports would be at 48.8 and 48.7. Traders can buy in declines with stop at 48.7.
