Softening global crude oil prices have propelled strong gains for the rupee and the domestic currency has recovered to a near 3-month high. Yesterday, the Indian rupee extended its winning streak for seventh consecutive session to close near three-month high at 70.69 yesterday. With this winning streak, rupee posted its best week in 18 months.
“Indian Rupee continues to appreciate against US Dollar thanks to fall in crude oil prices,” Bhavik Patel, Senior Technical Analyst, Tradebulls Securities, told FE Online. Is this trend likely to continue? “On technical levels, 70.80-70.60 is where we expect the rupee to bottom out. Technical indicators still confirm bearish bias for rupee i.e. we expect INR to test levels of 70.80 before bouncing. The trend reversal in the currency will only come above 72.20 in Future. Till then Indian rupee will have an advantage against US dollar,” he said.
Notably, the RBI is back to building up its dollar reserves, after nearly seven long months of continuously depleting it, buoyed by a recovery in the domestic currency. According to a recent report by Standard Chartered Bank, the RBI may have bought $500 million in the first week of November, and its likely that the apex bank may continue the purchases. RBI’s change in strategy comes on the back of revival of FPI flow.
Foreign funds have been net buyers of domestic securities in November. They have net invested Rs 10,523 crore so far, showed data from the National Securities Depository. More than half of the money came into debt securities at Rs 5,686 crore, the highest monthly inflow this financial year. For most of this year, the RBI was said to be selling dollars heavily in both the spot and forward markets as the rupee declined to a record low of Rs 74.48 against the dollar on October 11.