FX – WEEKLY UPDATE :
Weekly SYNOPSIS: 15/03/2024
Currency Map:
|
Currency Pairs |
Week CLOSE |
Prior week CLOSE |
% change |
|
USD/INR |
82.89 |
82.73 |
0.19 |
|
EUR/INR |
90.16 |
90.23 |
-0.07 |
|
GBP/INR |
105.58 |
105.40 |
0.17 |
|
JPY/INR |
55.90 |
55.70 |
0.35 |
Brent Crude closed at USD 85 VS previous week close of USD 82. Gold closed at USD 2155. Nifty closed at 22493 vs prior week close of 22023. 10 Year G-SEC Yield is now at 7.06%.
Major developments: USDINR traded in the 82.66-82.92 range last week and closed at 82.89, gain of 16 ps for USD as compared to prior week close of 82.73. EUR was flat w/w and GBP climbed 0.17 w/w against Rupee. Indian benchmark Equity climbed 2.08% w/w. 10 Year G-SEC Yield closed this week at 7.06%. 1-year fwd premia is at 1.62% p.a.
In March, FPI’S bought Rs 38538 Cr of Equities and bought Rs 10599 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 636 bn, as on March 8 th. Reserves climbed USD 11 bn w/w.
Rupee declined after gains in first few days of the week. RBI seems to have bought USD on dips to stem Rupee gains.
Trade deficit widened in Feb to USD 18.71 bn from Jan data of USD 17.49 bn. Exports expanded to USD 41.40 bn from USD 36.92 bn in Jan. Imports also rose to USD 60.11 bn from USD 54.41 bn. Services exports was flat at USD 32.8 bn and services imports declined to USD 15.39 bn. In this financial year so far, that is from April to February, merchandise exports contracted by 3.45% during February, while imports contracted by 5.32%. Services exports rose 6.76% and imports contracted 1.95% during the same period. Overall trade deficit, including merchandise and services, stood at $72.24 billion during the April 2023-February 2024 period, down from $116.13 billion in the year-ago period. India’s merchandise exports are at $394.99 billion, down 3.45%, while merchandise imports stood at $620.19 billion, down 5.32%.
Indian mid cap and small cap indices declined steeply as SEBI hinted at reviewing rules for MF’S investment in mid cap and small cap funds. MF’S small and mid cap funds require 65% investment in such stocks. Considering inflows and stretched valuations, funds are finding it difficult to deploy investors funds under present rules.
USDINR has major support at 82.65. The pair has to breach 82.95 to exhibit changing Global dynamics.
Hedging advise: Imports be hedged closer to 82.65. Exports be hedged closer to 82.95/83..
Global developments: US CPI and retail sales data were the focus events of last week. CPI, PPI data were stronger than expected. US CPI was stronger than expected, climbing 0.4% y/y. Last 3 months Core CPI is higher at 4.2% y/y as compared to 3.8% annualized for 12 months. Fed is unlikely to be cheered by Feb CPI data. US PPI rose 0.6% mom in February above expectation of 0.3% mom. For the 12-month period, PPI rose 1.6% yoy, above expectation of 1.1% yoy. That’s the highest level since September 2023. Retail spending was back in positive territory in February, after a sizeable decline to start the year. Retail sales rose 0.6% month-on-month (m/m) in February, reversing most of January’s -1.1 % decline (revised from -0.8% previously). This was lower than the consensus forecast calling for slightly stronger growth of 0.8%.The pick-up in retail spending is unlikely to be good news for policymakers at the Federal Reserve.
Fed is meeting this week and would mull recent data. Higher than expected CPI, PPI data and strong retail sales could delay Fed’s move to consider rate cuts. Recent data suggests that inflation has not abated to Fed’s comfort and consumer spending is still hot.
UK GDP expanded by 0.2% mom in January, matched expectations. In the three months to January, GDP has fallen by -0.1% 3mo3m.
ECB Governing Council member proposed two rate reductions “before the summer break” and a total of four throughout the year. This strategy, he argues, is essential to ensure that ECB’s monetary policy “does not become too restrictive” in the face of current economic challenges.
USD gained against Euro.
Focus will be on US Fed meeting outcome.
Currency technical levels: USDINR: 82.65 (Supports), 82.95/83.05 (resistance),
EURINR:90.75/91.20(Resistance)
GBPINR: Supports: 105.30( supports), Resistance:106.75/107.80(
JPYINR: Resistance:56.80/57.60, Supports: 54.95 (support).
Hedging advise: USDINR imports be hedged on decline to 82.65. EUR nearby payables be covered at 89.75/89.15. Receivables can be covered. GBP receivables can be covered at 106.50+.
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