WEEKLY SYNOPSIS: 12/06/2020
|Currency Pairs||WEEKLY CLOSE||PRIOR WEEK CLOSE||% change|
Brent Crude closed at USD 38.95VS prior week close of USD 41.17.
Nifty closed at 9972 vs prior week close of 10168.
10 Year G-SEC Yield closed at 5.79%.
Major developments:USDINR traded in the 75.42-76.10 range and closed at 75.84, gain of 0.34% for USD w/w. EUR and GBP climbedmarginallyagainst Rupee. Indian Equity markets declined 1.92% w/w basis. 10 Year G-SEC Yield declined to 5.79%.
It was a volatile week for Equity markets. Rupee was under pressure despite robust FII inflows in June. Rupee’s decline to 76.10 is unconvincing considering the loss in USD index.RBI’S USD buying at 75.10 levels has put a strong floor for USDINR pair. FX reserves is closer to USD 500 bn. RBI is mopping inflows to control volatility at a later time due to fear of bigger than expected economic damage caused by the pandemic. USDINR could trade in the 75-76 range as there is no big negative trigger for a significant decline in Rupee.
World bank has projected Indian economy to contract -3.2% this fiscal. Fitch has said that after contracting this Year, Indian economy could bounce back to 9.5% growth next year, if situation does not deteriorate further.S&P retained India’s sovereign rating at ‘BBB-‘ with a stable outlook, saying that while risks to growth are rising, the economy and fiscal position will stabilise and begin to recover from 2021 onwards.
FII’S have nett bought Rs 21635 Cr ofIndian Equities in June . FII’S have nett sold Rs 2193 Cr of Indian debt securities in June. In FY 19-20, FII’s have sold Rs 10200 Cr of Equities and 47393 cr of debt.
Global developments:Financial markets slumped on Thursday on reports of increasing infections in US . Dire economic outlooks released by the World Bank, OECD, and Federal Reserve shocked investor sentiment, leading to a sharp sell-off in equity markets on Thursday. Fed’s GDP projection also contributed to the big slump.U.S. Treasury and euro zone government bonds rallied after the Fed on Wednesday signaled it plans years of extraordinary support to counter the economic fallout from the pandemic.Fed officials at their policy meeting on Wednesday said U.S. gross domestic product is expected to decline 6.5% this year. They also flagged the need to keep the key interest rate near zero through at least 2022.
Eurozone’s Q1 GDP contraction was revised up to -3.6% qoq, up from initial estimate of -3.8% qoq. That was still the sharpest decline on record since 1995. For EU, GDP contracted -3.2% qoq, also the worst since 1995.
Japanese GDP contraction was finalized at -0.6% qoq in Q1, better than earlier estimate of -0.9% qoq, marginally missed expectation of -0.5% qoq. In annualized term, GDP contracted -2.2%, revised up from -3.4%.
Important developments in coming week:
Currency range forecast:USDINR: 75(support)-76.10(Resistance),EURINR:83.50(support)-86(Resistance), GBPINR: 93.50(support)-97(Resistance), JPYINR: 69.50-71.0.
Suggestion: Cover USD import payables on decline to 75.30.USD receivables can be hedged at 76+.1 M EURINR payables can be hedged at 83.50. EURINR receivables can be hedged closer to 86. GBPINR receivables hedging can be done on any rally to 97.