USD/INR Rupee Recovers from All Time Low as Government Increases Metals Tax

The good news is that Rupee has found some stability, the bad news is that the price level it is stable is very close to the the all time low. The USD/INR pair continues to return to the 61.40 level which is an improvement on the 61.71 level of yesterday.

The market took as a positive the tax hikes on metals that were announced. The Indian government is trying to reduce the amount of gold imports specially those of speculative nature. The demand for physical gold as an investment alternative hasn’t done the Rupee any favours as the appetite for the currency continues to drop. The fall int he price has also hit the final import price which has boosted inflation.

India is facing a current account deficit that the government is trying to reverse by attracting more foreign capital and curbing the imports of commodities. The central bank has in the past tried orthodox and unorthodox methods to boost the currency. The options have ranged from selling bonds to Indians livings abroad to calling the trading desks of major banks and suggest they refrain from holding speculative positions.

USD/INR Technical

The INR recovered from all time highs but is still caught in a depreciating current. Resistance levels will be breached if government action is not seen as strong enough. Supply of the currency continues to rise and there hasn’t been a solution that reverses the capital inflow. Strong bullish signals are in the horizon on the back of the lack of impact of the central bank measures.

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