The rupee, which has depreciated over four per cent since October 15 from 43.97 to 45.855 on Friday, is expected to decline further to 46.30-46.70.
The currency futures for December delivery closed at 46.11 a dollar on the Multi Commodity Exchange (MCX) and 46.16 a dollar on the National Stock Exchange (NSE) on Friday. The weekly trading data on these exchanges indicate a significant weakness in the rupee, with 45-50 per cent of the total volume of five million contracts changing hands above 46.03 a dollar.
The immediate trigger has been the strengthening of the dollar in the last four days on concerns that Europe’s debt problem may worsen and military action in Korea could escalate, boosting demand for the US currency.
The US Dollar Index has appreciated around three per cent from a low of 78 on Monday to 80.32 on Friday. The ICE US dollar index futures for December delivery, traded on InterContinental Exchange Inc, settled at 80.43 on short covering.
The rupee December futures showed considerable weakness on both MCX and NSE to close at 46.11-46.16 on Friday. The futures settled above the value area (45.70-46.03) — the price interval that embodies 70 per cent of the day’s trading volume.
The market picture chart (MKTP), which displays time and volume at price in the form of distribution, is indicating the rupee would depreciate to 46.30-46.70 going ahead.
Depending on global factors, if the rupee appreciates, the local currency’s gain may not exceed 45.68 a dollar.
The ICE US dollar index futures are expected to strengthen further to 81.30-81.70, with strong buy side volume in the value area (80.04-80.40). The index futures may get support at 78.72, indicates the MKTP chart.
The dollar has appreciated against the yen for a fourth consecutive week, the longest streak in 20 months, while the Euro fell for a third week as investors speculated Portugal and Spain would be the next European countries to need a financial rescue.
