WEEKLY SYNOPSIS: 16/8/2019
Currency Map:
| Currency Pairs | WEEKLY CLOSE | PRIOR WEEK CLOSE | % change |
| USD/INR | 71.15 | 70.79 | 0.50 |
| EUR/INR | 78.82 | 79.30 | -0.60 |
| GBP/INR | 86.55 | 85.41 | 1.45 |
| JPY/INR | 66.99 | 66.97 | 0 |
Brent Crude closed at USD 58.70 VS prior week close of USD 58.50.
Nifty closed at 11047 vs prior week close of 11109.
10 Year G-SEC Yield closed at 6.55.
Major developments: USDINR traded between 70.85 and 71.47. EURINR spiked higher and closed lower .GBP gained against Rupee.
It was a truncated, still volatile week for USDINR pair. Rupee gained to 70.85 initially on reports of US delay in tariff imposition on Chinese imports. However, the sentiment reversed as US President linked trade tariffs with handling of Hong Kong protests.
In economic data releases, Indian trade deficit declined, WPI inched lower to 1.05%, lowest in 20 months and CPI was subdued at 3.15%. Food inflation is at 2.36%. Auto sales fell over 18% in July with car sales at the lowest in 20 years. Two wheeler sales declined 17%, Commercial vechicle sales fell 25% and car sales fell 30% in July.
India’s trade deficit narrowed to USD 13.43 billion in July 2019 from USD 18.63 billion in the same month last year and below market expectations of USD 15.70 billion. Merchandise exports rose 2.25 percent to USD 26.33 billion and imports were down 10.43 percent to USD 39.76 billion. In April-July 2019-20, the trade deficit narrowed to USD 59.39 billion from USD 65.27 billion in the same period of the previous fiscal year.
Markets expect economic revival package to be announced shortly as PM held consultations with Finance Minister.
FII’S have nett sold Rs 9049 Cr of Indian Equities in Aug . FII’S have nett bought Rs 56450 Cr of Indian Equities in this calendar Year till date. FII’S have pulled out Rs 22000 Cr of Indian Equities since budget day. FII’S have nett bought Rs 11843 Cr of Indian debt securities in Aug FII’S have nett bought Rs 30625 Cr of Indian debt in this calendar year till date.
Global developments:
-Global markets were rocked by deteriorating US-China trade relations. China has vowed to retaliate against US tariffs, even as US President linked trade tariffs to handling of HK protests.
-US 2 year yield rose above 10 Year yield, which is called as inversion. Inversion indicates weakening of economic growth/ recession. Since US data is still strong with retail sales climbing and unemployment at record lows, there is still little fear of recession.
-German growth contracted and EU yields dived lower. Euro weakened on reports that ECB is planning a significant and impactful monetary easing in Sept meeting.
-Argentine Peso crashed and soured EM Currencies sentiment.
-Brexit uncertainty prolongs.
-Gold rallied and stocks gyrated as trade issues boosted safe haven flows.
Important developments in coming week: Fed and ECB minutes
Currency range forecast for coming week:
USDINR: 70.85-71.45, EURINR: 78.30-80, GBPINR: 84.50-86.50, JPYINR: 66-68
Suggestion: Cover 1 month USD import payables on dips to 70.30. USD exports may be hedged on rally to 71.50-71.80. EURINR receivables can be hedged on spike to 80+ levels. Payables can be covered closer to 78. GBPINR receivables can be covered.
