Currency Map:


Brent Crude closed at USD 98.45 VS prior week close of USD 86.40. Gold closed at USD 1701. Nifty closed at 17314 vs prior week close of 17094. 10 Year G-SEC Yield closed at 7.49%.

Major developments: USDINR traded in the 81.35-82.43 range last week and closed at 82.33 as against prior week close of 81.35. Rupee declined 1.2% w/w. EUR climbed 0.54% w/w and GBP climbed 1.01% w/w against Rupee. Indian benchmark Equity index climbed 1.28% w/w. 10 Year G-SEC Yield closed at 7.46%. 1-year fwd premia is at 2.80% p.a. FX reserves stands at USD 532.66 bn . FX reserves has declined from its all time high of USD 650 bn.

Rupee declined steeply as Crude climbed steeply from around USD 86 to USD 98 per barrel. Strong USD against majors and stop loss trigger also contributed to Rupee decline. RBI did sporadic intervention, but could not reverse Rupee’s fall.

Indian exports declined 3.5% y/y to USD 32.62 bn. Trade deficit was reported at USD 26.72 bn vis a vis USD 28.68 bn in Aug. Imports climbed 5.5% to USD 59.35 bn. During the first half (April-September) of the financial year FY23, India’s merchandise exports grew 15.5 per cent to $229 billion while imports rose 37.9 per cent to $378.5 billion, leading to a trade deficit of $149.5 billion.

Indian Sep PMI declined marginally to 55.1. Sep GST Collections was reported at 147686 Cr.

World bank downgraded Indian growth to 6.5%, citing economic developments in major economies and tightening of monetary policy.

USDINR’s resistance is at 83.35. Support is at 81.95. The pair could move higher with strong support above 81.95.

Focus will be on CPI and IIP data.

Global developmentsUSD ‘s uptrend resumed with strong jobs data. US non-farm payroll employment grew 263k in September, just slightly below expectation of 265k. Monthly job growth has averaged 420k in 2022, compared with 562k in 2021.Unemployment rate dropped from 3.7% to 3.5%, below expectation of 3.7%. Labor force participation rate dropped from 62.4% to 62.3%.Average hourly earnings rose 0.3% mom, matched expectations.

Strong labor data gives a greenlight for next round of 75 bps rate hike by Fed. USD index climbed post Fed meeting.

Equity markets rallied to start the week with hopes of a ‘Fed pivot’ before retreating on Friday as the jobs report drove yields higher and dampened the prospect of a less aggressive Fed.

Oil prices rose as OPEC cut supply by 2 mn bpd, defying US pressure to increase supplies. US Government is likely to respond to the OPEC cut by releasing more oil from its Strategic Petroleum Reserve (SPR). The Biden administration has already drawn the SPR to its lowest level since 1984, in a bid to reduce fuel prices ahead of the November midterm elections. 

OPEC’S supply cut decision will complicate matters for Fed further. Higher Oil prices will impact US CPI.

The accounts of ECB’s September 7-8 monetary policy meeting showed that a “very large number” of committee members expressed a preference for a 75bps hike, which was “a proportionate response” to upward revisions to inflation outlook and an important signal of the determination to bring inflation back to target in a “timely manner”.

Focus is on US retail sales data.

Currency technical levels: USDINR: 81.90 (Supports), 83.35 (resistance), EURINR: 81.45(Resistance), 78.75/77.75 (Support), GBPINR:  92.35(Resistance). JPYINR: 57.50 (resistance) /55.50 (support).

Hedging advise: USDINR Imports can be hedged on decline to 81.90. EURINR receivables be hedged.  GBP Exports be hedged.

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