FX – Weekly Update


Currency Map:

USD/INR 74.93 74.81 0.16
EUR/INR 88.65 88.80 -0.16
GBP/INR 98.12 98.14  
JPY/INR 70.83 71.75 -1.28

Brent Crude closed at USD 44.66VS prior week close of USD 43.64.

Nifty closed at 11214 vs prior week close of 11078.

10 Year G-SEC Yield closed at 5.88%.

Major developments:USDINR traded in the 74.78-75.16 range and closed at 74.93, loss of 0.16% for Rupee w/w. EUR and GBP closed almost flat against Rupee. Indian Equity markets climbed 1.22% w/w basis. 10 Year G-SEC Yield closed at 5.88%.

Rupee is still stuck above 74.50, despite robust rally of crosses against USD in the last few weeks. FDI inflows and shrinking trade deficit should have favored a healthy Rupee gain. RBI’S constant USD buying seems to be the prime reason for Rupee’s sideways movement. Expect USDINR to trade in the 74.50-75.50 zone.Indian Equity indices continued to show strength, in line with Global markets and better than expected corporate results.

RBIS policy action was the dominant event in the outgoing week.RBI maintained status quo in rates. As per RBI MPC, inflation is expected to remain elevated and growth will be negative in H1. RBI extended restructuring framework for MSME’S and announced special restructuring window for corporate and personal loans.

FII’S have nett bought Rs 390 Cr of-Indian Equities in August till date . FII’S have nett bought Rs 587 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:USD struggled and Gold climbed steeply even as Equities oscillated. Gold benefited from liquidity and uncertainty. Focus is on US stimulus package, US-Sino tech war and vaccine hopes. Corona cases continued to surge in India and US. US President said that TikTok Chinese app will have to be sold within 45 days to US company to avoid a ban. Sanctions will be imposed on entities dealing with TikTok owners after 45 days. US placed further restrictions on Chinese officials from traveling to US.

US economic data was robust with further improvement in ISM(mfrg) and ISM (services) data. Labor market also improved with additional employment.

US non-farm payroll employment grew 1763k in July, above expectation of 1510k. Unemployment rate edged lower to 10.9% and average hourly earnings rose 0.2% m/m.BoE left monetary policy unchanged as widely expected. Bank Rate is maintained at 0.1%. The asset purchase target is also held at GBP 745B. 

Focus will be on US retail sales data.

Important developments in coming week:US retail sales data.

Currency range forecast:USDINR:74.50(support)-75.50(Resistance),EURINR: 86(support)-89(Resistance), GBPINR: 96(support)-99(Resistance), JPYINR: 69-71.50.

Suggestion: Cover USD import payables on decline to 74.50.USD receivables can be hedged at 75.25+.EURINR payables can be hedged at 86. EURINR receivables hedging can be considered partially at 88+. GBPINR receivables hedging can be part done at 98+.

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