WEEKLY SYNOPSIS: 28/08/2020
|Currency Pairs||WEEKLY CLOSE||PRIOR WEEK CLOSE||% change|
Brent Crude closed at USD 45.87VS prior week close of USD 44.30.
Nifty closed at 11647 vs prior week close of 11371.
10 Year G-SEC Yield closed at 6.09%.
Major developments:USDINR traded in the 73.28-74.91 range and closed at 73.40 as against prior week close of 74.85, gain of 1.93% for Rupee w/w. EUR declined 1.17% and GBP declined 1.34% against Rupee. Indian benchmark Equity indices rallied 2.42% w/w basis. 10 Year G-SEC Yield closed at 6.09%.
It was a momentous week for Rupee as RBI stepped aside to let Rupee gain. Inflows on account of FCCB and FII inflows into Equities along with weak USD against majors were prime reasons for Rupee’s stellar show. This was accompanied by Equity rally, which intensified with auto and banking sectors leading the way.
Indian 10 Year G-SEC yield spurted to 6.22%, but softened to close the week at 6.09%. RBI has announced operation twist to stem long term yield. Rising inflation has been pushing yields and USD/INR fwdpremia higher. Indian Q1 GDP is set for release on Monday and is likely to show that economy contracted between and 20 and 25%.
FII’S have nett bought Rs 36640 Cr ofIndian Equities in August till date . FII’S have nett sold Rs 142 Cr of Indian debt securities in August till date. In this financial year, FII’S have nett bought Rs 83967 Cr of Equities and have sold Rs 34812 Cr in debt. In FY 19-20, FII’s have sold Rs 10200 Cr of Equities and 47393 cr of debt.
Global developments:USD declined on Friday after showing signs of strength early last week. USD’S decline was inspired by Fed Chairman’s announcement that Fed will target average inflation of 2%, implying that it will be patient if inflation overshoots 2%. Presently, inflation is only at 0.6%. Fed Chairman seems to indicate that even if employment swings back to full potential, it will pose no threat to price stability due to productivity growth. USD interest rates is set to remain very low for a considerable period and hence a major support for USD revival has faded.
Next week focus would be on US employment and manufacturing data.
Important developments in coming week:US spending data and Fed Chairman’s speech..
Currency range forecast:USDINR:72.70(support)-73.70/74.40(Resistance),EURINR: 86(support)-89.50(Resistance), GBPINR: 96(support)-99(Resistance), JPYINR: 69-71.50.
Suggestion: Cover USD import payables on decline to 72.70.USD receivables can be hedged at 74+.EURINR payables can be hedged at 87/86. EURINR receivables hedging can be considered partially at 89+ and again at 91. GBPINR receivables hedging can be part done at 98+.
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