WEEKLY SYNOPSIS:                                                                                               10/07/2020

Currency Map:

USD/INR 75.21 74.64 0.76
EUR/INR 84.90 83.96 1.12
GBP/INR 94.67 93.18 1.59
JPY/INR 70.32 69.41 1.31

Brent Crude closed at USD 43.27VS prior week close of USD 42.73.

Nifty closed at 10768 vs prior week close of 10607.

10 Year G-SEC Yield closed at 5.76%.

Major developments:USDINR traded in the 74.50-75.34 range and closed at 75.21, gain of 0.76% for USD w/w. EUR and GBP also gainedagainst Rupee. Indian Equity markets climbed 1.50% w/w basis. 10 Year G-SEC Yield declined to 5.76%.

Rupee erased its prior week gains significantly, though the overall trend is still bullish for Rupee. Q4 Current account surplus and likely trade surplus in coming quarter augur well for Rupee. Inflows are also expected to pick pace further due to funds raised by banks and corporates. However, RBI action will determine how much Rupee can gain further. On the economic front, IIP contracted again in May. However the pace of contraction slowed as companies have resumed partial production and services. Indian IIP contracted by 34.7% in May over last year, compared to a revised contraction of 57.6% in April. Mfrg declined 39.3% in May. Mining output declined 21.4% and electricity generation contracted 15.4% in April. The recovery path will be rough as states resort to localised lockdowns to fight corona infections.

FII’S have nett sold Rs 267 sold Cr ofIndian Equities in July . FII’S have nett sold Rs 402 Cr of Indian debt securities in July. In FY 19-20, FII’s have sold Rs 10200 Cr of Equities and 47393 cr of debt.

Global developments:Gold extended its rally and climbed past USD 1800, the level that was seen last in 2011. Crude Oil also extended its gains with Brent climbing to USD 43.50. Equity markets experienced two way range bound movement as concerns over infections weighed against future optimism.

US data offered hope for sharp recovery, though clouded by increasing infections and reimposition of lock downs in some states.US ISM (mfrg) data was back in expansion mode. US ISM(non mfrg) data returned to pre pandemic levels. Recent spread of infections can reverse last month economic and employment gains. High frequeny indicators does not suggest a sustained rebound as states in US are rolling back reopening plans. Companies may also let workers go, if infections are not contained rapidly. Apple and McDonald’s have either delayed reopening stores or announced new store closures due to rising COVID-19 cases.

European Commission projects a deeper recession in Eurozone and EU in 2020, due to coronavirus pandemic. EU GDP is expected to contract by -8.7% in 2020. However it is expected to grow at 6.1% in 2021.

Important developments in coming week:US CPI, retail sales, UK GDP and ECB meeting.

Currency range forecast:USDINR:74.50(support)-75.40(Resistance),EURINR: 84(support)-85(Resistance), GBPINR: 92.50(support)-97(Resistance), JPYINR: 69-71.50.

Suggestion: Cover USD import payables on decline to 74.50.USD receivables can be hedged at 75.40+.1 M EURINR payables can be hedged at 84. EURINR receivables can be hedged closer to 85. GBPINR receivables hedging can be done on any rally to 95-96.

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