WEEKLY SYNOPSIS: 23/10/2020
|Currency Pairs||WEEKLY CLOSE||PRIOR WEEK CLOSE||% change|
Brent Crude closed at USD 41.65VS prior week close of USD 42.80. Gold closed at USD 1904.
Nifty closed at 11930 vs prior week close of 11762.
10 Year G-SEC Yield closed at 5.84%.
Major developments: USDINR traded in the 73.30-73.78 range and closed at 73.60 as against prior week close of 73.32, declineof 0.38% for Rupee w/w. EUR climbed 1.45% and GBP climbed 1.65% against Rupee. Indian benchmark Equity indices climbed 1.45% w/w basis. 10 Year G-SEC Yield closed at 5.91%.
Rupee declined surprisingly as its correlation with USD index has been broken. RBI seems to have bought USD consistently at lower levels. FX reserves has now topped USD 550 bn. Current account is estimated to be in surplus this Year. It is expected to be between 0.3% to 1% of GDP. With Capital inflows strong, BOP surplus could expand to USD 100 bn this year. RBI pumped 20000 Cr of liquidity last week through state bond purchases.
FII’S nett bought Rs 15907 Cr ofIndian Equities in Oct . FII’S nett bought Rs 2688 Cr of Indian debt securities in Sept . In this financial year, FII’S have nett bought Rs 95390 Cr of Equities and have sold Rs 25860 Cr in debt. In FY 19-20, FII’s have sold Rs 10200 Cr of Equities and 47393 cr of debt.
USDINR is expected to gain to 72.75, if Euro rallies after US election. RBI’S action will determine the magnitude of Rupee gains. With US fiscal and current account deficit expanding, USD could weaken.
Global developments:US housing data suggests that economic momentum is still strong and may be resilient even as US Congress could not agree on further round of stimulus. But the concern is on surging cases in Europe. France and UK have announced restrictions which could impair service sector, particularly hotels, restaurants and tourism.EU and UK PMI composite (mfrg and services) highlighted the stark divergence between manufacturing and services. While services sector contracted, mfrg was strong . German manufactring growth was easily one of the best in decades. However, renewed restrictions in some EU countries poses risk of double dip downturn.
Focus is now on US elections.
Important developments in coming week: ECB meet , US Personal spending and income data and advance US GDP estimate
Currency range forecast: USDINR:73/72.70(support)-73.80/74(Resistance), EURINR: 85.50(support), GBPINR: 93.25(support), JPYINR: 68-71.
Suggestion: Cover USD import payables on decline to 73.05. USD receivables can be hedged at 73.70+.EURINR payables can be hedged. GBPINR receivables hedging can be done on rally to 97-99 levels.
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