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Brent Crude closed at USD 83 VS prior week close of USD 83. Gold closed at USD 1818. Nifty closed at 17465 vs prior week close of 17944. 10 Year G-SEC Yield closed at 7.42%.

Major developments: USDINR traded in the 82.62-82.86 range last week and closed at 82.75 loss of 8 ps for USD as against prior week close of 82.83. EUR declined 0.39% w/w and GBP climbed 0.64% w/w against Rupee. Indian benchmark Equity index declined 2.66% w/w. 10 Year G-SEC Yield closed at 7.42%. 1-year fwd premia is at 2.08% p.a. FX reserves stands at USD 561.26 bn as on Feb 17 th. This is the third consecutive week of a drop in the reserves after the $8.319 billion decrease in the previous reporting week to $566.948 billion.

Rupee remained in a tight range with weakening bias. RBI seems to be intervening sporadically even in NDF market. Indian Equity indices declined sharply, in tandem with fall in Global markets. Fear of greater rate hikes by Fed and ECB weighed down on markets.

In Feb, FII’S  have bought Rs 2345 Cr of Equities and have bought Rs 1150 Cr of debt . In last Calendar Year, FII’S sold close to Rs 1.06 lac Cr worth of Equities.

USDINR’s supports are at 82.58/82.34.  200 day average is at 80.48. Expect Rupee to trade in the 81-83 range in coming weeks.

Global developments: USD ended higher against majors as markets priced in higher terminal rates than anticipated earlier, due to strong economic data. Markets are pricing in nearly 40% chance of one more hike in July to 5.50-5.75%, i.e. a higher terminal rate, comparing to just 20% a week ago and 0% a month ago. Core PCE inflation accelerated, dashing hopes of end to rate hikes. Strong personal consumption and sticky inflation have dashes hopes of any relief in rate hikes.

US GDP was revised down from 2.9% quarter-on-quarter (q/q) annualized to 2.7%. Real consumer spending rose 1.1% month-on-month (m/m) in January, reflecting gains in both goods and services. The Fed’s preferred inflation gauge, core PCE, accelerated modestly, rising to 4.7% y/y from an upwardly revised 4.6% in December.

FOMC minutes noted that “Fed members continued to “anticipate ongoing increases,”, with a restrictive policy stance likely needing to be maintained to ensure that inflation was on a substantially downward trend. Fed minutes were considered hawkish against the back drop of solid economic data.

US 10-year yield finally broke through 3.905 near term resistance last week.US stocks ended deeply lower.

PMI data from Eurozone and the UK indicated that service sectors picked up much momentum in February, and are leading the economies out of recession risk. ECB is set to raise rates by 50 bps in March.

US NFP, ISM data are two important data events in the coming week.

Events to focus: US NFP, ISM

Currency technical levels: USDINR: 82.58/82.34 (Supports), 82.95 (resistance), EURINR: 88.50/90.45(Resistance), 87.45/86.70 (Support), GBPINR:  98(Support)/100.65/102.85 (Resistance). JPYINR: 62 (resistance) /59.50 (support).

Hedging advise: USDINR Exports can be hedged on rally to 82.90. EUR and GBP exports can be covered on rally to 89 and 100.35+ respectively.

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