FX – WEEKLY UPDATE :
Weekly SYNOPSIS: 20/09/2024
Currency Map:
|
Currency Pairs |
WEEK CLOSE |
PRIOR WEEK CLOSE |
% change |
|
USD/INR |
83.55 |
83.92 |
-0.44 |
|
EUR/INR |
93.28 |
92.95 |
0.35 |
|
GBP/INR |
111.23 |
110.22 |
0.91 |
|
JPY/INR |
58.83 |
59.49 |
-1.10 |
Brent Crude closed at USD 74.50 VS previous week close of USD 71.50. Gold closed at USD 2622. Nifty closed at 25790 vs prior week close of 24356. 10 Year G-SEC Yield is now at 6.86%.
Major developments: USDINR traded in the 83.47-83.91 range last week, and Rupee gained 37 ps against USD w/w. EUR climbed 0.35% w/w and GBP climbed 0.91% w/w against Rupee.
Indian benchmark Equity indices climbed 1.78% w/w. 10 Year G-SEC Yield closed at 6.86%. 1-year fwd premia is at 2.34% p.a.
FX reserves stood at USD 689 bn, as on Sep 6 th. Reserves climbed US D 223 mn w/w.
In Aug , FPI’S have bought Rs 32195 Cr of Equities and sold Rs 412 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 2.34% p.a. for 1 year. It is expected to expand to 2.5%/2.75% by Dec end as Fed starts cutting rates.
Rupee climbed to 83.47 as RBI refrained from intervention. Rupee has been gaining on the back of Fed rate cuts. However, RBI has facilitated Rupee gain by stepping aside. Recently, RBI Governor said that Rupee is the most stable currency amongst Asian Peers and stability fosters confidence and investment.
WPI inflation eased to 1.31% in Aug vs 2.04% in July. WPI softened due to fall in Natural gas and crude prices. Core WPI inflation declined to 0.7% in Aug from 1.2% in July.
USDINR could trade in the 83.40-84.90 range.
Indian Equity markets climbed, tracking rally in Global asset markets.
Hedging advise: Imports be hedged on decline to 83.40. Exports be hedged in the 83.75/83.85+ range for less than 3 months.
Global developments: USD softened, yields stabilised and Equity indices climbed post Fed meeting.
Fed cuts rates by 50 bps to 4.75% to 5% range and indicated two more 25 bps cuts this year and 100 bps cuts next year. Fed sees 2.9% as terminal rates by 2026. GDP, which is now forecast at 2% for 2024, down from a prior forecast of 2.1%, and maintain this pace through 2027. For 2024, Fed members sees the unemployment rate at 4.4% for 2024, up from a prior forecast of 4%. The unemployment rate is expected to remain at 4.4% in 2025, up from a prior estimate of 4.2%, and fall to 4.3% in 2026, up from 4.1% previously.
At the press conference that followed the decision, Fed chairman Jerome Powell downplayed concerns about a recession, pointing to solid growth, cooling inflation and a “very solid labor” market.
The Fed remains data dependent, and nearly all economic data out this week including retail sales, industrial production, housing starts, and initial jobless claims came in better than expected, and remain consistent with an economy that’s still expanding in the 2-2.5% range. Next week’s personal income and spending data will provide more insight on August spending trends and is also likely to show a bit more progress on easing inflationary pressures (Chart 2). But it’s the September and October employment reports that could ultimately be the deciding factor of whether the Fed cuts by 25 or 50 bps in November.
US retail sales rose 0.1% month-on-month in August, ahead of the consensus forecast calling for a decline of 0.2% m/m. Consumer spending sits at a robust 3.5% annualized for the third quarter, which would be the fastest pace of PCE growth since Q1-2023. This is expected to slow down as labor market turns soft and savings potential declines.
ECB Vice President reaffirmed the central bank’s cautious approach regarding rate cuts in the upcoming meetings. He stressed that ECB remains “fully committed” to a data-dependent strategy, making decisions on a “meeting-by-meeting” basis.
While he acknowledged the possibility of cuts in both October and December, he highlighted that December would provide a clearer picture.
Germany’s ZEW Economic Sentiment dropped sharply in September, falling from 19.2 to 3.6, significantly missing expectations of 18.6. EU ZEW Economic Sentiment fell to 9.3, down from 17.9. ZEW President highlighted that “the hope for a swift improvement in the economic situation is visibly fading,” adding that the balance between optimists and pessimists is now evenly split.
BoE opted to keep the Bank Rate unchanged at 5.00%, as expected, with an 8-1 vote. BoE emphasized that “absence of material developments”, it will continue to follow a “gradual approach” to unwinding policy restrictions. Monetary policy is expected to stay restrictive for a sufficiently long period until inflation risks subside, ensuring it returns to the 2% target. The central bank reaffirmed its commitment to closely monitor inflation persistence and determine the necessary level of restrictiveness “at each meeting.”
Currency technical levels: USDINR: 83.40 (Supports), 83.75/83.90 (resistance),
EURINR:94(Resistance),92.60/
GBPINR: Supports: 108.50( supports), Resistance:111.35(Resistance).
JPYINR: Resistance:59.50/61, Supports: 58.50/57.65 (support).
Hedging advise: USDINR imports be hedged on decline to 83.40. EUR nearby payables be covered on dips to 91.65. GBP receivables can be covered at 112+.
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