The Indian Rupee (INR) has seen a shift in sentiment in recent weeks, becoming more favorable despite ongoing global uncertainties and volatility, according to a report by Union Bank of India. The Dollar Index (DXY) is expected to stabilize at current levels, which could have a positive impact on the INR. The report suggests that the USD/INR pair has shown adherence to previous technical levels, with the pair taking support at 84.45 on April 30. However, the next day, this support level was breached, and the USD/INR fell below the 84 mark, touching 83.7575.
The decline in the USD/INR pair led to significant buying activity from importers and oil companies, who purchased dollars at the lower levels, causing the pair to rebound and close at 84.5725. The report predicts that the Indian Rupee may consolidate at current levels, taking support at 84.40. A break below this level could open the doors to 83.85 levels, while on the upside, the pair is expected to face resistance near 84.90, and a breach of this level could lead to 85.60.
The bank emphasizes the importance of monitoring the Dollar Index (DXY) for any possible overshoot, particularly if current technical levels are breached. Additionally, any news related to probable escalation at the border may hurt the Rupee sentiment. Despite these potential risks, the report maintains a “buy on dips” stance for USD/INR. The recent improvement in sentiment for the Rupee could influence future movements positively.
The report’s outlook on the INR is cautiously optimistic, suggesting that the currency may experience some volatility in the short term but could potentially strengthen in the long term. The bank’s recommendation to “buy on dips” indicates that it expects the USD/INR pair to decline in the short term, providing an opportunity for investors to purchase dollars at a lower price. Overall, the report provides a mixed outlook for the INR, highlighting both the potential risks and opportunities in the foreign exchange market.