FX – WEEKLY UPDATE :
WEEKLY SYNOPSIS: 11/09/2023
Currency Map:
|
Currency Pairs |
WEEK CLOSE |
PRIOR CLOSE |
% change |
|
USD/INR |
82.98 |
82.67 |
0.37 |
|
EUR/INR |
89.15 |
89.62 |
-0.52 |
|
GBP/INR |
103.93 |
104.64 |
-0.67 |
|
JPY/INR |
56.50 |
56.79 |
-0.51 |
Brent Crude closed at USD 90.50 VS prior week close of USD 87. Gold closed at USD 1942. Nifty closed at 19819 vs prior week close of 19435. 10 Year G-SEC Yield closed at 7.19%.
Major developments: USDINR traded in the 82.63-83.22 range last week and closed at 82.98, gain of 37 ps for USD as compared to prior week close of 82.67. EUR declined 0.52% w/w and GBP declined 0.67% w/w against Rupee. Indian benchmark Equity index climbed 2.02% w/w. 10 Year G-SEC Yield closed at 7.19%. 1-year fwd premia is at 1.70% p.a.
FX reserves stood at USD 598 bn as on Sept 1 st. In Sep, FPI’S have sold Rs 5460 Cr of Equities and bought Rs 473 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.
Rupee recovered from 83.22 on RBI intervention. Rupee was weighed down by external developments. Rally in USD Index and decline in Yuan contributed to negative Rupee sentiment.
Indian PMI(services) was reported at 60.1. PMI(mfrg) grew at the fastest pace in 3 months at 58.6. Aug GST collections climbed 11% to 1.59 Lac Cr. Auto sales climbed 9% y/y in Aug.
Considering RBI’S proactive stance, USDINR pair could still get stuck in a tight range. However, with USD gaining against majors, the lower range of the pair could be lifted from 82.25 to 82.50 and upper range may be tolerated till 83.50/83.70 range in next few months.
Hedging advise: Imports be hedged on declined to 82.70. Exports be hedged gradually.
Global developments: USD strength seems to be intensifying as EU and UK economic situation turns gloomier.
US services data was stronger than expected, aiding further USD rally. ISM said: “The past relationship between the Services PMI and the overall economy indicates that the Services PMI for August (54.5 percent) corresponds to a 1.6-percent increase in real gross domestic product (GDP) on an annualized basis.”
Pound declined as BOE Governor told UK Parliament that the central bank is closer to terminal rates. Further aggravating the downfall, a BoE survey unveiled a stark decline in businesses’ on-year inflation expectations, thus spotlighting intensified speculation over the path of BoE’s tightening.
ECB Governing council member said that Euro interest rates are close to peak. He added that in fight against inflation, maintaining rates for a sufficiently long period now counts for more than further significant rises”.
US and Asian markets were down as tech stocks declined steeply following Chinese direction to Govt employees to avoid using Apple Phones. US law makers pressed for curbs on export of technology to China.
German economic research institute, DIW, is projecting a -0.4% dip in the nation’s economic output for the year. This downturn is primarily attributed to sluggish domestic consumption and a falter in export dynamics, exacerbated by a slowed Chinese economy.
Higher Oil prices remain a matter of deep concern. Oil prices pushed higher as Saudi and Russia extended voluntary Oil output cuts till Dec end. This could impact inflation and result in fiscal tightening. US 10 Year Yield pushed higher to 4.26%.
Technically, EURUSD is on the verge of breaking 200 day moving average support. If that happens, EURUSD could decline to 1.06 initially. GBPUSD is still above 200 day average, which is now at 1.2450. Expect GBPUSD to break the crucial 1.2450 support zone and fall into bear territory.
Currency technical levels: USDINR: 82.86/82.70 (Supports), 83.30/83.47 (resistance),
EURINR:89.90(Resistance),87.
GBPINR: Supports: 102( supports), Resistance:105.50(Resistance).
JPYINR: Resistance:57.75, Supports: 54.50 (support).
Hedging advise: USDINR imports be hedged at 82.70 on decline. EUR and GBP exports can be covered on rally to 89.75 and 105+ respectively.
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