Currency Map:

USD/INR 70.99 68.54 3.56
EUR/INR 82.39 80.04 2.94
GBP/INR 91.89 89.86 2.25
JPY/INR 61.28/100 YEN 63.96/100 YEN 4.37


WT1 Crude: USD 69.94 vs 68.76 in July end.

Nifty: 11680 vs 11371 in July end.

Rupee declined 3.56% in August to close at 70.99. Rupee has declined 12.25% since touching 63.25 in Jan 2018. Expanding trade deficit due to higher Oil prices, decline in EM Currencies due to trade issues, USD rate hike and FII funds pull out have all contributed to Rupee fall. Though FII’S have invested Rs 3875 cr in Indian markets in Aug, they have nett sold Rs 36,000 Cr of debt and Equity investments this year. RBI has sold USD 25 bn from its reserves to defend Rupee in the last few months. Though reserves are still comfortable, RBI may not be inclined to sell more from its reserves, if Global Currency movements favour USD strength. Indian policy makers are not concerned about Rupee fall. Niti Aayog Vice Chairman has said recently that Rupee fall is long overdue and is not a matter of concern.

Important developments:

Indian developments:

1) Q1 GDP climbed 8.2%, best growth rate since 2014-2015.

2) Trade deficit climbs to USD 18 bn in July.

3) Fiscal deficit target met for last fiscal. Expects deficit of 3.3% for this fiscal.

4) Retail inflation cools to 4.3%.

5) Govt unperturbed about INR decline, terms it as long overdue.

6) RBI fx reserves decline around USD 25 bn to USD 400 bn. RBI’S intervention ineffective. 

Global developments:

1) Trade tension persists. Though US signs agreement with Mexico, there is no headway with EU and China. US Q1 GDP climbs 4.2%.

2) USD weakens in August as Fed signals gradual rate hike. US President reiterates that EU and China are manipulating currency levels.

3) China controls Yuan decline. Chinese stock markets decline on trade war worries.

4) Crude climbs after falling to USD 64.50 (WTI Crude).

5) Turkey and Argentina Currencies decline steeply, exerting pressure on EM Currencies.

Upcoming events:

1) Fed’s Sept 26 th meeting. FOMC is certain to hike rate by 25 bps.

2) RBI meeting on Oct 5th. Repo rate may be hiked by 25 bps to counter Rupee fall.

3) Indian IIP and CPI data

Outlook for Sept: USDINR is on the path to 72. Support is at 70.30 and later at 69.50. EURINR rally is due to USDINR rally. Expect 81-83.50 range. GBPINR is expected to trade in the 89.50-93.50/94.50 range. JPYINR is expected to trade in the 63-66 zone.

Currency pairs 85% confidence range for Sept Most likely range
USD/INR 69.50-72.50 70.30-72.50
EUR/INR 81.25-84.50 81-84.25
GBP/INR 90.50-93.50 89.50-94.50
JPY/INR (100 Yen) 63-66 63-66


Suggestion: USD imports be hedged, EURINR imports be hedged on decline to 81.25/80 levels.

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