The currency markets continue to reflect immense amount of dollar strength, and this is the trend that
is sustaining after the two rate cuts from the Fed, and also as there is going to be a regime change in
the US as early as Jan 25. Further developments would depend on the actual trajectory of US official
rates. Against all currency majors, the US Dollar has strengthened over the last three months. What is
currently influencing the markets is three events or factors. The first is the continuing geo-political
tensions. This has not been resolved as yet. But the probability of it getting resolved is high though it
may take more time with the developments around Syria. A second and more important factor is the
degrowth in China and the related economic worries. A third factor is the return of Trump as the
President, and the likelihood of aggressive trade and tariff postures by the US in the coming months
which may have some disruptive effect. Dollar is holding up well in the Dollar Index which is currently
at 106.20. In the last one month the highs it touched is 107.55. There is strong support at 105.70 level. But
the broader range seen for the index is 113.30 and 95.20 going by the three-year technical charts. While
this is the broader range, the likelihood of either levels being reached in the immediate term can be
ruled out. The immediate range may be 103.60/107.90. Even with rate cuts, the tide turning against the
Dollar looks less likely especially in view of the potential performance of the economy over the next
couple of years. The Dollar-Rupee has gone much beyond the 84.20/30 levels. Currently very close to
84.80 levels, the currency pair may target 85.20/30, 85.50/60, and 85.80/90.