Anindya Banerjee, DVP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities Ltd.
"The first half of the week was about the impact of the new COVID strain on markets and as a result risk sentiment soured and there was the unwinding of carry trade. But post US Fed chair's testimony, where he sounded very hawkish with comments on faster tapering, it was the US Dollar Index which pushed higher. However, none of that could trigger much of a move in USDINR as the pair is lacking the push from speculators. FPI outflows are being matched by inflows in FDI and corporate $ borrowing and demand for carry trade. Therefore, the result is a deadlock between $ bulls and bears near 75.00 levels on spot. India's economic data continues to be impressive, with both GDP and core sector output beating expectations. This is a positive factor for the Rupee.
Next week, if there is follow-through in the sell-off in the local stock market, then USDINR is going to find the momentum to push towards 75.60/70 levels on futures. The downside remains protected near 74.95/75.00, thanks to fragile risk sentiments, hawkish Fed, and support from dip buyers near 75.00. Therefore, one can continue to buy on decline with stop loss below 74.90 on a daily closing basis. Target 75.60 & 75.70 levels. But in case, USDINR Dec futures drop below 74.90 with high volume, exit shorts as then the pair can fall towards 74.40/50 levels."