Rupee to be range-bound

(The Hindu Business Line 4th June 2008)The pressure on rupee eased, spurred by various measures undertaken by RBI to support the currency, including the move to conduct open market operations in oil bonds. Easing crude prices also helped in stemming the decline.
The reprieve on the crude front is, however, likely to be temporary since the commodity stays in a strong uptrend though it can move between $125 and $135 for a few more sessions. The strength in dollar over the last few sessions is also acting against the Indian currency.
The US dollar index on FINEX has rebounded from 71.91 on May 27, implying that the dollar strength can extend for a couple of weeks more. Sharp sell-off in stock prices is the other factor that is contributing to the decline over the last two sessions. The rupee has been appreciating from the trough at 43.2 against the dollar recorded last week. It is now certain that the sharp depreciation phase that commenced in the last week of April is now complete. We stay with the view that a sideways move can ensue for the medium term. The upper boundary can be slightly higher at 41.6 while we retain the lower boundary at 44.
The range-bound move between 41.6 and 44 is likely to be consolidation phase (temporary halt) before the currency continues its depreciation. The medium term view for the currency stays negative and this bearishness will be mitigated only on a move beyond 41.6.
5-day view
The near term uptrend in the rupee halted at 42.1 on Monday and the currency is weakening again. We maintain the view that the USD-INR currency pair would stay in the range between Rs 42 and Rs 43.5 over the near term. The Indian currency faces strong resistance in the band between 41.8 and 42.1 over the next few sessions.
Key supports for the week ahead is at 42.8. Once this level is penetrated, the next target would the previous trough at Rs 43.2.
Supports – 42.8, 43, 43.2
Resistances – 42.1, 41.8, 41.6