FX – MORNING UPDATE :

USDINR opened at 83.01 y’day and the pair traded in the 82.92-83.04 range. Spot USDINR closed at 82.98, loss of 7 ps for USD as against prior close of 83.05.

RBI reference rate was fixed at 82.95 on 01/02. Feb USD/INR closed at 83.05 y’day, loss of 8 ps for USD as compared to prior day’s close of 83.13. Feb Euro/INR closed at 89.87, GBP/INR at 104.95 and Yen/INR at 56.84. 1 year USDINR fwd premia was trading at around 1.87% p.a.  FX reserves stood at USD 616 bn, as on Jan 19 th. Reserves declined by USD 2.93 bn w/w.

In Jan, FPI’S have sold Rs 36036 Cr of Equities and bought Rs 16951 Cr of debt . In last calendar year, FII’S have net bought Rs 172853 Cr of Equities and have net bought Rs 70489 Cr of debt.

Benchmark Nifty declined 28 points (0.13%) y’day. US S&P climbed 27 points (0.55%) y’day. Nikkei declined 0.90% and Hang Seng climbed 0.52% y’day.

Euro is now at 1.0874, Pound at 1.2749, Yen at 146.32.

Commodities: Gold is now at USD 2053 and WT1Crude at USD 74/Brent at USD 79.

Interest rates: USD 10 Yr yield is at 3.95% and 3 m libor closed at 5.59%. Indian 10 yr benchmark yield closed at 7.15%.

Economic news: Indian budget maintained status quo on taxes, increased Capex by 11.1% to Rs 11.1 lac Cr. Major highlights were: 1) 3 Railway corridors, 2) Housing for Middle class, 3) Expansion of airport developments. 4) Long term interest free loans to states to boost tourism. FY 24 Fiscal deficit is expected to be 5.8% of GDP and is likely to decline to 5.1% of GDP in FY24-25.

US Fed left rates unchanged at 5.25%-5.5% and ruled out March rate cut. Fed Chairman said that labor market is tight and monetary tightening is having impact on inflation and growth. He added that inflation is maintaining downtrend , but still above its goal. He added that members felt that rate cuts can be done at some time during this year and can be expedited if labor market shows weakness. He also added that Fed can maintain its present rate for a longer time, if outlook remains uncertain on inflation.

BOE maintained status quo, with 6 members opting for no change, 1 opting for rate cut and two opting for rate hike. This reflected divergent views and indecisiveness in BOE MPC. BoE has notably relinquished its tightening bias, and significantly lowering the conditioned rate path, which now sees interest rate to fall to 3.9% by the onset of next year. Despite this dovish tilt, the bank simultaneously revised its inflation forecasts upward, suggesting that inflationary pressures will persist above target until 2026. 

Data highlights: – US Weekly jobless claims jumped to 224k, ISM(mfrg) climbed to 49.1.

-US Construction spending climbed 0.9% m/m.

-EU CPI climbed 2.8% y/y, PMI(mfrg) was reported at 46.6 and unemployment rate was at 6.4%.

Friday’s calendar : –  US non farm payrolls and factory orders

Daily Support/Resistance table

MAJOR SUPPORTS/RESISTANCES AND TREND TABLE

Technicals: Spot closed below 20 and 50 day average but above 200 day moving averages.20 day moving average is at 83.10. 50 day moving average is at 83.21.200 day moving average is at 82.75. Daily MACD is in sell zone. Important support is at 82.80 and important resistance is at 83.17/83.24. Spot closed at the average level of the day.

Intraday supports and resistances for Feb contract are:

PP: 83.06, S1:82.99, S2:82.92, R1:83.13, R2:83.20.             

Hedging strategy: Hedging decisions be taken according to comfort and accounting rates.

However on directional basis, suggest the following:

USD exports be hedged at 83.35/83.40. Imports be hedged at 82.92/82.80 for 3 months.

CROSS CURRENCY TECHNICALS:

EURO/USD: The pair is between major moving averages. Major resistance is at 1.0935/1.10. Next major support is at 1.0770. Daily MACD is in sell zone, implying an important top at 1.1275. Weekly MACD is in buy zone, implying important bottom at 1.0450.

GBP/USD: The pair is above all major moving averages. Daily MACD is in sell zone, implying important top at 1.2810 and weekly MACD is in buy zone, implying important bottom at 1.25. Important support is at 1.2610/1.25. Important resistance is at 1.28/1.30.

USD/YEN: The pair is above all major moving averages. Daily MACD is in buy zone, implying important bottom at 140. Important resistance is at 148.90/150 and support is at 146/144.35.