Rupee support to come at 47.23 level

Over the past week, the dollar-rupee gave up some of its recent gains to close at 47.26 from the week’s high of 48.02. Besides local and global development, suspected RBI intervention helped cap the upmove. The easing of restrictions on ECBs and FII investment in long-term corporate debt for infrastructure are positive developments for the Indian rupee and may limit the downside pressure on the currency.

That said, global factors remain in the driver’s seat and renewed volatility can’t be ruled out. With the RBI monetary policy out of the way, focus this week is squarely on the Federal Reserve meeting (FOMC) on September 20-21 . Investor expectations of further Fed easing have increased significantly over the past month and this is likely to provide some stability to the market into the FOMC.

However, Euro area developments remain equally important and further negative news regarding Greece could rock the boat. Also, the risk is that the FOMC disappoints, leading to sharp reversal in positioning in the second half of the week. Thus, movement in dollar-rupee may be more two-way this week compared to the week prior. Technically, immediate support for the rupee is at 47.23 and immediate resistance is at 48.02– the past high.

(The author is FX Strategist, Standard Chartered Bank).