• By Goodwill
  • 61 Comments
  • December 15, 2023

FX RATES AND USDINR FWDS :

Major developments:

USD is now at 83.32. USDINR opened at 83.31. Fwd premia – 1 year fwd premia is at 1.68% p.a
 
-ECB and BOE signaled that rate cuts is still not in the realm of discussion.
 
-3 BOE members even voted for rate hike.
 
-ECB and BOE stances are in contrast to Fed’s stance. Fed did not push back against rate cuts and even signaled three rate cuts next year.
 
-US retail sales remained strong.
 
-US 10 Year yields declined further to 3.95%, aiding Global Equity surge.
 
USDINR outlook: USDINR is kept range bound by RBI. Three positives for Rupee are 
 
1) US rate may have peaked, 2) Crude has declined below USD 75, 3) Robust FII inflows. FII inflows have invested Rs 1.4 lac in this calendar year.
 
Negatives: 1) Possibility of Yuan decline and hence Asian FX could fall due to Chinese economic worries. 
Considering next year election, RBI may not allow Rupee to create headlines and increase inflation due to fall. Hence, expect RBI to be active on both sides. However, due to the first three reasons, threat for bigger Rupee fall seems to have receded significantly. With major central banks differing with Fed on rate stance, USD weakness could continue till they signal rate cuts. This is also positive for Rupee.
 
The only major worry is USD/CNY movement. If Yuan declines due to Chinese economic issues, Asian Currencies could decline. Based on the above expectations, Exporters can hedge at around 83.40 and importers can hedge in the 83.05-83.25 zone. Fwd premia is expected to climb higher as US Yields retrace more than Indian Yields. 
 
RBI rates
Trade Date  1 USD 1 GBP 1 EUR 100 YEN
14-Dec-23 83.35 105.35 90.86 58.82
 
-USDINR is at 83.32.Prior day’s close was 83.31.
 
-Indian Equity indices climb.
 
-Indian 10 year G-SEC yield is at 7.19%.
 
-USDINR 1 yr fwd premia is at 1.68%.
 
USDINR @ 83.32, EUR/USD@ 1.1001, GBP/USD @ 1.2772, USD/JPY @ 141.62, EUR/INR @ 91.65, GBP/INR @ 106.42, JPY/INR @ 58.82. Gold@2037, Brent Crude @ 77, Nifty @ 21337(+155), 10 Year G-SEC @ 7.19%.
 
Hedging:
USDINR payables can be hedged on dips to 83.24/83.18 . 
Eur receivables can be hedged now 
GBPINR receivables can be hedged now.
 
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Comments

  1. goltogel
    January 21, 2024

    Grateful for sharing, mandatory insights.

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