FX – WEEKLY UPDATE :
WEEKLY SYNOPSIS: 05/01/2024
Currency Map:
|
Currency Pairs |
WEEK CLOSE |
PRIOR WEEK CLOSE |
% change |
|
USD/INR |
83.15 |
83.17 |
|
|
EUR/INR |
90.88 |
92 |
-1.21 |
|
GBP/INR |
105.35 |
106.10 |
-0.70 |
|
JPY/INR |
57.26 |
58.82 |
-2.65 |
Brent Crude closed at USD 78 VS prior week close of USD 77. Gold closed at USD 2045. Nifty closed at 21710 vs prior wwek close of 21730. 10 Year G-SEC Yield closed at 7.23%.
Major developments: USDINR traded in the 83.12-83.35 range in Dec and closed at 83.15, loss of 2 ps for USD as compared to prior week close of 83.17. EUR declined 1.21% w/w and GBP declined 0.70 w/w against Rupee. Indian benchmark Equity index closed flat w/w. 10 Year G-SEC Yield closed at 7.23%. 1-year fwd premia is at 1.77% p.a.
FX reserves stood at USD 623 bn as on Dec 29 th. FX reserves climbed USD 2.75 bn, last week. In Jan, FPI’S have bought Rs 2665 Cr of Equities and bought Rs 2632 Cr of debt . In last calendar year, FII’S have net bought Rs 172853 Cr of Equities and have net bought Rs 70489 Cr of debt.
USDINR pair is facing stiff resistance at 83.35. There is lot of exports selling closer to 83.35. USDINR has not broken 83.40 since Oct 2022, on close basis. Since premia is very low, there is also equal interest to cover imports closer to 83.10.
Indian Dec PMI(services) rose to 59 from Mov reading of 56.9. Positive demand and favourable economic conditions were reasons behind buoyant reading. However PMI(mfrg) dipped to 54.9 in Dec. Composite PMI data rose to 3 month high of 58.5. Indian Dec GST collections climbed 10% y/y to Rs 1.65 lac Cr. Core sector growth eased to 7 month low of 7.8%. in Nov, it was at 12%.
Expect USDINR to trade in the 83.03-83.30 range in coming week.
Focus will be on CPI and IIP data.
Hedging advise: Imports be hedged closer to 83.05/82.92/82.80. Exports be hedged closer to 83.30/83.35.
Global developments: USD rebounded as US yields crossed 4% again. Robust US employment data and weaker than expected EU PMI data seemed to support USD. However, participants are hesitant to take a USD bullish call ahead of US CPI data.
US non-farm payroll employment grew 216k in December, above expectation of 168k. Unemployment rate was unchanged at 3.7%, below expectation of a rise to 3.8%. Participation rate fell from 62.8% to 62.5%. Average hourly earnings rose 0.4% mom, above expectation of 0.3% mom. Over the past 12 months, average hourly earnings increased 4.1% yoy.
Earlier in the week, FOMC minutes was released. Fed minutes showed central bank officials acknowledging progress against inflation over the past year. But the minutes also offered few cues on when the bank could potentially begin trimming interest rates as signalled during the meeting. The minutes showed policymakers concerned over a soft landing for the U.S. economy, and whether monetary policy was too restrictive.
EU Core CPI (excluding energy, food, alcohol & tobacco) slowed from 3.6% yoy to 3.4% yoy, matched expectations.
Eurozone’s PMI Manufacturing was finalized at 44.4 in December, up slightly from November’s 44.2. Despite this minor uptick, marking a seven-month high, the index remained below the critical 50.0 threshold, signaling a continued deterioration in operating conditions across the sector. UK PMI Manufacturing was finalized at 46.2 in December, down from November’s 47.2. This marks the seventeenth consecutive month where the index has remained below the neutral 50 threshold, indicating ongoing contraction.
Focus now shifts to US CPI. This reading is significant as Fed ponders over timing and size of rate cuts from Q2.
Currency technical levels: USDINR: 83.03/82.90/82.80 (Supports), 83.35/83.40 (resistance),
EURINR:92(Resistance),89.50/
GBPINR: Supports: 104.20/103.40( supports), Resistance:106.50(Resistance).
JPYINR: Resistance:59, Supports: 56.45 (support).
Hedging advise: USDINR imports be hedged on decline to 82.92/82.80. EUR and GBP exports can be covered.