The Rupee Spin

Spin is an art and an important socioeconomic activity for politics, show biz, marketing and capital markets. Its capital market spinning which invariably falls on its head again and again. And only short public memory lets it thrive.
Let’s take the rupee. We have been tracking the rupee in this column since December 2006 from Rs 44.6 levels with anticipated targets near Rs 40 to the dollar. Our last column was in the thick of action as the currency made an eight-year high and strengthening spin was all over the place. While the spin was looking at strengthening citing GDP, forex inflows, Federal Reserve action, Asian currencies, IPOs and a host of other reasons, we said, “The psychological or wave impulse down seems incomplete. We will be surprised if any bounce back on the rupee crosses the 42 levels. We see this as a coiling continuing action. The main trend still seems down to near Rs 38 or lower,” on June 11, 2007.
After almost three months of price action, the rupee is still there coiling between 40 and 41.6. We still consider this as a counter trend move which should invariably resolve lower back to 40 and lower. Even month ending signals for August do not augur well for a bounce above 42. Between September and October, we should see a potential seasonal low for the currency as it attempts to retest 40 yet again. And with intermediate (multi-week) momentum continuing to be weak and the market-wide spin a bit muddled about the direction of the rupee, the currency might be ready to come out of a three-month long consolidation range and start trending again to get stronger vs the dollar.