Currency Map:

USD/INR 71.08 70.94 0.20
EUR/INR 78.95 78.67 0.35
GBP/INR 92.65 92.72 -0.075
JPY/INR 64.53 64.82 -0.44


Brent Crude closed at USD 65.10 VS prior week close of USD 65.87

Nifty closed at 12352 vs prior week close of 12256.

10 Year G-SEC Yield closed at 6.63%.

Major developments: It was a subdued trading week for USDINR. The pair traded in the 70.73-71.10 range. It closed at 71.08, registering a nominal gain of 14 ps for USD. EURINR climbed 0.35% and GBPINR declined marginally.

USDINR pair has established a trading range of 70.50-72.25. The pair could continue to trade till a forceful issue triggers a one way movement. Trade deficit is well contained due to lower imports. Flows are robust. The only worry is fiscal deficit. Forthcoming budget may allow deficit to expand to 3.6%. Considering the improved Global sentiment due to easing of trade tensions, trigger for Rupee decline has faded.

On macro-economic data, Indian trade deficit fell to USD 11.3 bn in Dec as against USD 12.1 bn in Nov. Trade deficit stands at USD 118.10 bn in this fiscal till Dec as against USD 148.2 bn during the same period last year. Dec exports was reported at USD 27.4 bn. Imports climbed 0.5% to USD 38.6 bn.

Global developments: Global markets returned to risk taking mode with US equities climbing to new highs. USD gained last week against majors.

US economic data showed that 2019 year ended on a high note. Housing starts jumped to 16 year highs, industrial production was higher in Dec and Core PCE inflation remains stuck at 1.6% y/y.                                                                                Consumption remained robust in the fourth quarter, as evidenced by the healthy rise in retail sales in December. Retail sales advanced by 0.3% month-on-month, and November’s figure was also revised higher.

The week was also significant for signing of US-China trade deal.           US and China signed phase 1 deal covering intellectual property rights and its enforcement, opening up of Chinese market for financial services and commitment to purchase USD 200 bn worth of US agri products in next 2 years. US tariff has been reduced to 7.5% on USD 125 bn worth of Chinese imports. However, Sept 15 th tariff of 25%  on USD 250 bn worth of Chinese imports remains in place.

Chinese GDP grew 6.0% yoy in Q4, matched market expectations. Overall growth in 2019 was at 6.1%, slowed from 2018’s 6.6%. That’s the slowest annual growth since 1990.

ECB, Bank of Japan are meeting this week. ECB is likely to maintain status quo in its assessment. EU PMI surveys will play a key role in guiding EUR/USD movement. If PMI”S are strong, EUR/USD could bottom out.

With Brexit issue not in focus, attention is towards UK data. String of weak data has fueled expectations of rate cut.

Important developments in coming week: ECB meeting.                       

Currency range forecast for coming week:

USDINR: 70.575-71.30, EURINR: 78.70-79.50, GBPINR: 92-94, JPYINR: 64.50-66.50.

Suggestion: Cover 1 month USD import payables on decline to 70.80. USD receivables can be hedged at 71.80. 1 M EURINR payables can be hedged now at 78.70. EURINR receivables can be hedged closer to 80. GBPINR receivables hedging can be done on any rally to 94-95.


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