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Dollar Steadies Ahead of Fed Meeting

Rupee expected to open flat in line with other Asian currencies while weakness in domestic equities and higher inflation number could drag local currency lower in second half of the trade. On Monday, rupee drops following stronger dollar and higher crude oil prices. Rupee marked fifth day of loss as greenback advances earmarked the short covering ahead of this week’s FOMC meeting. Higher than expected inflation number and foreign fund selling also weighed on rupee on Tuesday.

Spot USDINR gained 20 paise to 73.27 level. Technically, it has resistance at 73.30 and sustainable trade above it will open for 73.50 and 73.80 levels while it could hold the support of 72.77.

RBI’s monthly report indicates it has reduced its intensity of intervention in forward segment as outstanding forward position came down marginally to $72.75 billion in March and the way premium fell in April and May figure could be much lower than March.

India’s inflation rate surged above the central bank’s target in May with Consumer price inflation jumped to 6.3% year on year from 4.2% in April. Core inflation hit 6.2%, up from 5.2% in April. This probably reflects companies passing on higher costs to consumers from rising fuel prices and virus-related expenses. On a month-on- month basis, core prices increased 1.4% in May, up from 0.5% in April.

We have trade figures for May on later today which might see rise in import bills due to higher crude oil and other commodity prices.

Asia stocks looked set for a steady start after their U.S. peers closed at a record and a bond rally stalled ahead of a key Federal Reserve meeting. The 10-year Treasury yield rose to 1.49% after hitting three-month lows on Thursday. The dollar edged higher. Elsewhere, Oil traded above $73 a barrel as investors weighed the outlook for rising demand.

USDINR

USDINR June futures witnessed short covering rally in last couple of day with fall in open interest and rise in price.

The 13 DEMA crossed the 21 DEMA upward indicating short term strength in the pair. Now, it has resistance at 50 SDMA at 73.76.

Momentum oscillators and indicators also turning upward suggesting recovery in the pair.

USDINR June futures has support at 72.90 and resistance at 73.75. We remain neutral to bullish until it holds the level of 72.90 while any level above 73.50 pulls the pair towards 73.75 level

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