FX – WEEKLY UPDATE :
Currency Map:
|
Currency Pairs |
WEEK CLOSE |
PRIOR WEEK CLOSE |
% change |
|
USD/INR |
82.93 |
83.01 |
-0.09 |
|
EUR/INR |
89.71 |
89.35 |
0.40 |
|
GBP/INR |
104.95 |
104.48 |
0.54 |
|
JPY/INR |
55.03 |
55.26 |
-0.41 |
Brent Crude closed at USD 81.50 VS prior week close of USD 83.50. Gold closed at USD 2035. Nifty closed at 22212 vs prior week close of 22040. 10 Year G-SEC Yield is now at 7.07%.
Major developments: USDINR traded in the 82.82-83.02 range last week and closed at 82.93, loss of 8 ps for USD as compared to prior week close of 83.01. EUR climbed 0.40% w/w and GBP climbed 0.54 w/w against Rupee. Indian benchmark Equity climbed 0.78% w/w. 10 Year G-SEC Yield closed this week at 7.07%. 1-year fwd premia is at 1.72% p.a.
In Feb, FPI’S have sold Rs 1975 Cr of Equities and bought Rs 15500 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.
FX reserves stood at USD 616 bn, as on Feb 16 th.
No major data or events impacting FX markets last week. However, debt inflows continue to be strong and is supporting Rupee’s nominal gains.
Rupee continues to be range bound and is expected to trade in the 82.80-83.35 range for some more months. There is no clear theme in Global FX markets. However, with US inflation trending down in a sustained manner and with very little signs of negative impact of US tighter monetary policy on US growth and employment, Fed may bring forward rate cuts to second quarter. This may have positive implications for inflows into Indian debt and equity markets and support Rupee.
Hedging advise: Imports be hedged closer to 82.80. Exports be hedged closer to 83.05/83.12.
Global developments: Global financial markets are on risk on mode, fuelled by tech enthusiasm. AI and semiconductor companies led the rally.
FOMC minutes maintained a hawkish stance, as members felt that achieving inflation target will take time and the economy is robust to warrant rate cuts. However, members also felt that rate peak has been achieved.
US Economy remained resilient in second half of 2023. It averaged 4%, almost double the long term growth. Strong growth and labor market robustness could delay progress in inflation reaching 2% level. This week will witness release of US Spending and Core PCE data. If they remain strong, USD could rally with downward adjustment on rate cut expectations.
ECB minutes showed cautious stance among its members towards the idea of interest rate cuts. Officials reached a “broad consensus” on the notion that discussing rate cuts at this juncture was “premature” with many members emphasizing “risk management considerations” as a foundation for this perspective.
ECB members called for patience and caution on rate cuts, though it may look tempting. ECB official also said that ECB follows Fed monetary path with time lag, implying rate cut decision after Fed initiates rate cuts.
UK and EU PMI data suggested that manufacturing is still in contraction mode. However, services sector remains in expansion mode.
EU’S uplift in services contributed to PMI Composite’s rise from 47.9 to 48.9, marking an 8-month peak yet still indicating slight overall economic contraction.
German ifo survey also indicated that German economy is stabilizing at lower level of growth.
UK PMI Composite index rose from 52.9 to 53.3, underscoring a period of accelerated economic growth and marking the highest reading in nine months. Chief Business Economist at S&P Global Market Intelligence, emphasized the significance, noting that recent uptick is part of a consistent pattern of improvement over the “four straight months”.
Focus is on US Durables order, PCE index and consumer spending.
Currency technical levels: USDINR: 82.80/82.65 (Supports), 83.05/83.15 (resistance),
EURINR:90.20(Resistance),88.
GBPINR: Supports: 104.10/103.70( supports), Resistance:105.40/106.50(
JPYINR: Resistance:56.60/57.60, Supports: 54.20 (support).
Hedging advise: USDINR imports be hedged on decline to 82.80. EUR nearby payables be covered at 88.80/88.20. Receivables can be covered on pullback to 90.10/90.35. GBP receivables can be covered at 105.50/106+.
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