FX – WEEKLY UPDATE :
Weekly SYNOPSIS: 27/09/2024
Currency Map:
|
Currency Pairs |
WEEK CLOSE |
PRIOR WEEK CLOSE |
% change |
|
USD/INR |
83.69 |
83.55 |
0.16 |
|
EUR/INR |
93.46 |
93.28 |
0.19 |
|
GBP/INR |
112.04 |
111.23 |
0.72 |
|
JPY/INR |
58.23 |
58.83 |
-1.01 |
Brent Crude closed at USD 71.50 VS previous week close of USD 74.50. Gold closed at USD 2658. Nifty closed at 26178 vs prior week close of 25790. 10 Year G-SEC Yield is now at 6.84%.
Major developments: USDINR traded in the 83.44-83.72 range last week, and Rupee declined 16 ps against USD w/w. EUR climbed 0.19% w/w and GBP climbed 0.72% w/w against Rupee.
Indian benchmark Equity indices climbed 1.50% w/w. 10 Year G-SEC Yield closed at 6.84%. 1-year fwd premia is at 2.39% p.a.
FX reserves stood at USD 692.3 bn, as on Sep 20 th. Reserves climbed US D 2.8 bn w/w.
In Sep , FPI’S have bought Rs 55855 Cr of Equities and bought Rs 708 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 2.39% p.a. for 1 year. It is expected to expand to 2.5%/2.75% by Dec end as Fed starts cutting rates.
Rupee’s gains seems to have been thwarted by RBI. Rupee could not gain beyond 83.45, despite huge FII inflows in Sept. Gains in Asian peers like Yuan did not have much effect, due to RBI action. However, the effect of Yuan and Yen gain along with inflows and softer crude prices will ensure that Rupee’s decline is also limited. Rupee’s fall could be below the fwd curve now and hence export hedging at higher levels is advisable.
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 83.80+.
Global developments: Equity markets rallied, Yen surged and Chinese stocks soared on surprise stimulus move by China. China’s surprise stimulus measures invigorated investor sentiment, leading to substantial gains in Chinese and Hong Kong equities, as well as strengthening of Chinese Yuan. Yen surged as market was surprised by the new Choice for PM, who is considered as supporting higher Yen interest rates.
EU economy is under stress as highlighted by very weak PMI data. This has fuelled expectations of aggressive rate cuts by ECB also.
In the Economic Outlook Interim Report, OECD raised its global GDP growth forecast for 2024 by 0.1% to 3.2%, while keeping the 2025 projection steady at 3.2%. India is expected to grow at 6.7% in 2025.
In the US, growth forecasts remain unchanged at 2.6% for 2024 but have been downgraded by 0.2% to 1.6% for 2025. Eurozone’s GDP growth forecast is unchanged at 0.7% for 2024 and revised down by 0.2% to 1.3% for 2025.
US annual PCE core inflation edged up to 2.7%, the monthly increase was a modest 0.1%. From the same month a year ago, PCE price growth slowed from 2.5% yoy to 2.2% yoy, below expectation of 2.3% yoy. Core PCE price growth accelerated from 2.6% yoy to 2.7% yoy, matched expectations This tamer monthly inflation growth suggests that underlying price pressures would, at least, not obstruct Fed’s plan to do another aggressive rate cut at its next meeting. However, upcoming non-farm payrolls and CPI data will still play a decisive role in Fed’s final decision.
OECD projects that Fed’s main interest rate could ease to 3.5% by the end of 2025 from the current range of 4.75%-5%. Similarly, ECB is expected to reduce its rate to 2.25% from 3.5% now.
Germany’s economic prospects have deteriorated further as the Joint Economic Forecast Project Group revised its GDP forecasts downward. The group now expects the German economy to contract by -0.1% in 2024, a downgrade from the previously anticipated 0.1% growth.
Swiss national bank lowered its policy rate by 25 basis points to 1.00%, citing that inflationary pressure “has again decreased significantly”, largely driven by the recent appreciation of Swiss Franc. SNB’s statement also indicated that further rate cuts “may become necessary” in the coming quarters to maintain price stability in the medium term.
Currency technical levels: USDINR: 83.40 (Supports), 83.80 (resistance),
EURINR:94(Resistance),92.60/
GBPINR: Supports: 110.60( supports), Resistance:113(Resistance).
JPYINR: Resistance:59.50/61, Supports: 57.10 (support).
Hedging advise: USDINR imports be hedged on decline to 83.45. EUR nearby payables be covered on dips to 91.65. GBP receivables can be covered at 112.50+.
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