We had looked for stability within 50.00-30 with overshoot into 49.80-50.00 not to sustain based on the support there from RBI and/or oil PSUs. Rupee posted smart gains to hit 49.88 only to give up for a fall to 50.14 before closing the day at 50.05 (on 6/4) and traded around 50.10-15 yesterday (7/4) with most markets closed. The strength in rupee was triggered by bullish stock market; steady crude oil and dollar’s loss against major currencies. However, oil companies’ entry to buy forward dollars limited rupee gains. In the meanwhile, dollar has bounced strongly (against Euro) from 1.3550 to below 1.34 and global stocks are giving back their recent gains with crude comfortably within $50-55. Stock/Currency market is likely to be in a consolidation phase before the next move up, hence would look for stability in rupee at 50.00-50.50 within 49.80-50.80. In the big picture, there is a possibility of overshoot beyond 50.80 for 51.30 (in the event of Euro fall to 1.32 and losses in stock market) and move into 49.80-50.00 on further gains in the stock market and Euro rally back into 1.35-1.36. In the given scenario, the risk-reward is more in favour of staying “long” dollars – hence it is prudent for importers to stay covered on dips into 50 or below while exporters can afford to unwind part of their earlier sales for better re-entry level. 1Y dollar is trading at lower end of set 51-53 range (after bouncing from 50.90 and closing at 51.20). Given the uncertainties ahead on trade gap; crude oil price; sustainability of gains in stock market; restriction in flow of G7 government liquidity into emerging markets; possible dollar strength against major currencies and to keep rupee value competitive for exports, 1Y forward dollar below 51 should be a good import hedge. So, in the near term let us watch 50.00-50.80 within 49.80-51.30. For the day, range trade at 50.10-40 within 50.00-50 should be good enough.

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