WEEKLY SYNOPSIS: 12/05/2023
|Currency Pairs||WEEK CLOSE||PRIOR WEEK CLOSE||% change|
Brent Crude closed at USD 74 VS prior week close of USD 75. Gold closed at USD 2015. Nifty closed at 18314 vs prior week close of 18069. 10 Year G-SEC Yield closed at 7%.
Major developments: USDINR traded in the 81.70-82.23 range last week and closed at 82.16 gain of 36 ps for USD as against prior week close of 81.80. EUR declined 0.79% w/w and GBP climbed 0.15% w/w against Rupee. Indian benchmark Equity index climbed 1.35 w/w. 10 Year G-SEC Yield closed at 7%. 1-year fwd premia is at 2.15% p.a. FX reserves climbed USD 8 bn as compared to prior week and stood at USD 596 bn as on May 5 th. In May till date, FII’S have bought Rs 16682 Cr of Equities and have bought Rs 352 Cr of debt . In 2022-23 fiscal year, FII’S have net sold Rs 27593 Cr of Equities and have net bought Rs 838 Cr of debt.
India’s retail inflation eased to 4.7% in April, falling within the RBI’S inflation band of 2-6%. In March, inflation declined to 5.66%. Food inflation eased to 3.84% from 4.79% in April. IIP climbed 1.1% in March. Mfrg climbed 0.5%, mining grew by 6.8%. In fiscal 2023, the IIP grew 5.1 per cent , as compared to 11.4 per cent in FY2021-22.
USDINR gained to 82.20 due to outflow of USD 1 bn, triggered by adjustment in MSCI stock allocation.
Hedging advise: Exports be hedged for a longer duration on spike to 82.30/82.40 levels.
Global developments: Euro weakened and Pound also declined against USD. US inflation eased modestly in April to 4.9% y/y.
BOE hiked rate by 25 bps in 7-2 vote and left door open for more rate hikes if inflationary pressures persists. BoE expects inflation to “fall sharply from April” and decline to “a little above 1% at the two and three-year horizons”. That would be “materially below the 2% target then.
Fed and ECB members continued to maintain hawkish rhetoric on rates.
Crude prices fell further on weak economic signals from China and labor market slow down in US. Stalemate in debt ceiling increase in US also weighed on economic outlook.
US retail sales data is the important data for this week.
On the technical picture, EURUSD has broken 50 day moving average. It has supports at 1.08/1.0740. Break below this could trigger further fall to 1.05.
Currency technical levels: USDINR: 81.62 (Supports), 82.25/82.40 (resistance),
GBPINR: Supports:101.75, Resistance:103.85(Resistance).
JPYINR: Resistance:61.50/63.50 Supports: 59.50/58.50 (support).
Hedging advise: USDINR exports can be hedged closer to 82.35/82.40. EUR and GBP exports can be covered on rally to 90.50 and 103+ respectively.
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