The Indian rupee extended gains on Monday, but a key technical indicator signalled that the currency’s winning run may come to a halt despite a broadly weaker dollar and portfolio inflows.
The rupee was at 83.4675 against the U.S. dollar as of 10:15 a.m. IST, up 0.1% from its close at 83.5625 on Friday.
The Indian currency has strengthened over the last five sessions, and rose 0.4% last week, logging its best week this year.
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Gains in Asian currencies after the Federal Reserve kicked off rate cuts last week and strong inflows have helped lift the rupee, traders said.
However, the currency’s gaining streak may run into a hurdle this week as the dollar-rupee pair’s 14-day relative strength index (RSI) has declined below 30, signalling the pair is ‘oversold’.
The 14-day RSI was last at 26, its lowest in three years.
In May, when the RSI came close to slipping below 30 after a four-day rally in the rupee, the currency pared gains, falling from a peak of 83.02 to 83.40 over the next three trading sessions.
It looks like the central bank is fine with the rupee’s appreciation, but the market will have to see if they “draw a line” closer to 83.30, a foreign exchange trader at a private bank said.
Asian currencies were mostly lower on Monday, while the dollar index was flat at 100.7 with investors awaiting comments from Federal Reserve policymakers later in the day, the first remarks from officials after the Fed cut rates by 50 basis points last week.
“Any U.S. dollar rebound could prove to be short-lived with U.S. yields set to head lower as the Fed aims to engineer a soft landing,” MUFG Bank said in a note.