FX – WEEKLY UPDATE :
Weekly SYNOPSIS: 06/09/2024
Currency Map:
|
Currency Pairs |
WEEK CLOSE |
PRIOR WEEK CLOSE |
% change |
|
USD/INR |
83.95 |
83.84 |
0.13 |
|
EUR/INR |
93.31 |
92.91 |
0.43 |
|
GBP/INR |
110.63 |
110.49 |
0.12 |
|
JPY/INR |
58.95 |
57.86 |
1.88 |
Brent Crude closed at USD 71 VS previous week close of USD 77. Gold closed at USD 2516. Nifty closed at 24852 vs prior week close of 25235. 10 Year G-SEC Yield is now at 6.98%.
Major developments: USDINR traded in the 83.85-84.02 range last week, and Rupee declined 11 ps against USD w/w. EUR climbed 0.43% w/w and GBP climbed 0.12% w/w against Rupee.
Indian benchmark Equity declined 1.54% w/w. 10 Year G-SEC Yield closed at 6.98%. 1-year fwd premia is at 2.16% p.a.
FX reserves stood at USD 684 bn, as on Aug 30 th. Reserves climbed US D 3.45 bn w/w.
In Aug , FPI’S have bought Rs 9477 Cr of Equities and bought Rs 200 Cr of debt . In FY 23-24, FII’S have net bought Rs 206279 Cr of Equities and have net bought Rs 123120 Cr of debt.
USDINR fwd premia has already touched 2.16% p.a. for 1 year. It is expected to expand to 2.5% by Dec end as Fed starts cutting rates.
PMI(mfrg) dipped to 57.5 in Aug from July reading of 58.1. Dip in business confidence due to competition and softening of input costs along with high inventory are the hallmarks of PMI data in Aug. India Services PMI was revised to a five-month high of 60.9 in August 2024 from 60.4 in the preliminary estimates, as the growth of incoming new business ticked higher. The latest result rose from 60.3 in July, marking the 38th consecutive month of growth in services activity, boosted by productivity gains and positive demand trends.
CPI and IIP data are awaited.
USDINR could trade in the 83.75-84.30 range in coming months.
Indian Equity markets corrected, tracking decline in Global asset markets.
Hedging advise: Imports be hedged on decline to 83.75. Exports be hedged in the 84.30+ range for less than 3 months.
Global developments: USD remained undecided and US Equities have continued their September bearish trend as historic seasonality suggested. Leading Wall Street indexes were all red for the week with the Nasdaq down around 5.6%, the S&P down 4% and the DJIA down around 2.84%. US Yields declined and Libor rates have also fallen as first rate cut approaches.
Market expectations of 50 bps cut in next Fed meeting has climbed over 50% afer employment data.
US Nonfarm payrolls showed signs of cooling labor market, but did not stoke fears of a severe economic downturn. Aug employment was at 142k and unemployment rate dipped to 4.2% and average earnings climbed 0.4% m/m. Growth was also well below the average monthly gain of 202k over the prior 12 months. Previous month’s growth was revised down from 114k to 89k.
US ADP report revealed that US private employment grew by 99k in August, falling short of the expected 150k. The job gains were spread unevenly across sectors, with goods-producing jobs rising by 27k and service-providing jobs adding 72k.
US ISM Manufacturing PMI rose from 46.8 to 47.2 in August, below expectation of 47.8,, indicates a fifth consecutive month of contraction.
ISM said: “The past relationship between the Manufacturing PMI® and the overall economy indicates that the August reading (47.2 percent) corresponds to a change of plus-1.3 percent in real gross domestic product (GDP) on an annualized basis.”
Focus will be on US CPI data as that could decide the quantum of first rate cut by Fed.
ECB will not be lagging behind in rate cuts as economic conditions remain tepid and inflation is cooling off. ECB is meeting in coming week and could flag off future rate cuts.
In July, Eurozone retail sales volumes rose by 0.1% mom, in line with market expectations. ifo stated that German economy remains in “stuck in crisis”, impacted by both economic and structural challenges. Following last year’s -0.3% contraction, the country’s price-adjusted GDP is expected to “only stagnate” in 2024.
BOE is expected to hold rates as UK economy bounced back strongly in the first half of 2024 and with wage growth and services inflation still elevated, the BoE can afford to pause after cutting rates for the first time this cycle in August.
Oil prices suffered a major selloff on the news centered about the potential resolution of a dispute in Libya that has caused a halt in the country’s crude production and exports.
Currency technical levels: USDINR: 83.76/83.65 (Supports), 84.10/84.30 (resistance),
EURINR:94(Resistance),92.60/
GBPINR: Supports: 110/108.50( supports), Resistance:111.35(Resistance).
JPYINR: Resistance:59.50, Supports: 58.50/57.65 (support).
Hedging advise: USDINR imports be hedged on decline to 83.75. EUR nearby payables be covered on dips TO 91.65. GBP receivables can be covered at 112+.
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