The Indian rupee has broken through a year-long trendline, opening up the door for more near-term gains as investors turn their focus to the upcoming federal budget.
(Bloomberg) — The Indian rupee has broken through a year-long trendline, opening up the door for more near-term gains as investors turn their focus to the upcoming federal budget.
The dollar-rupee closed below an uptrend in place since the beginning of 2022 on Tuesday, a bearish technical signal for chart watchers. The next support for the pair is around the 81 per dollar level, according to Fibonacci analysis, with a breach of that pointing the way to the 80 level last reached in August.
The rupee was up 0.3% to 81.57 per dollar on Wednesday, extending gains for a third day. The dollar/rupee also fell below its 100-day moving average, the first time since February, a bullish sign for the currency.
“The rupee may see some more gains with authorities unlikely to let the currency slip too much before the budget,” said Abhishek Goenka, chief executive at India Forex Advisors.
India’s currency has been an underperformer since the latter half of last year, weighed down by worries over the nation’s wide current account deficit. It has lagged its emerging Asian peers, in spite of an easing in crude oil price, as the nation’s central bank mopped up dollars to bolster its reserves.
The early-February budget will show India’s priorities for the year in the last full-year expenditure plan of Prime Minister Narendra Modi’s government before elections in 2024.
However, HDFC Bank Ltd. doesn’t see the rupee’s gains sustaining over the coming days on rising risks including uncertainty regarding the Fed rate-hike path, global recession fears and China reopening effect, it said in a note.
“We also see the India budget not providing any significant support for the rupee as fiscal consolidation and lack of any significant tax reliefs are likely to be ‘equity flow’ negative,” economists including Abheek Barua wrote in a note.
–With assistance from Malavika Kaur Makol.
(Updates with HDFC Bank comments in the seventh paragraph)
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