Currency Map:

USD/INR 74.85 74.90 -0.06
EUR/INR 88.45 88.43 0
GBP/INR 98.77 97.87 0.91
JPY/INR 70.80 70.26 0.76

Brent Crude closed at USD 44.30VS prior week close of USD 44.95.

Nifty closed at 11371 vs prior week close of 11178.

10 Year G-SEC Yield closed at 6.04%.

Major developments:USDINR traded in the 74.68-75.05 range and closed at 74.85, gain of 5psfor Rupee w/w. EUR closed flat and GBP climbed marginally against Rupee. Indian benchmark Equity indices rallied 1.72% w/w basis. 10 Year G-SEC Yield closed at 6.04%.

Rupee is still stuck above 74.50 and the range is compressed with daily range of around 10 ps. RBI’S constant USD buying seems to be the prime reason for Rupee’s sideways movement. RBI’S FX reserves has swelled to USD 538 bn as on Aug 7 th. RBI has added USD 60 bn in last one year.

Expect USDINR to trade in the 74.50-75.50 zone.Indian Equity indices struggled at higher levels and is looking ripe for correction.

Indian G-SEC yields has spurted and has pushed USDINR fwdpremia higher by 20 bps. Rising inflation and Govt fiscal deficit are contributing to higher yields.Indian CPI spiked to 6.93% in July due to higher food prices. Food inflation rose to 9.62%.RBI maintained status quo in its last meeting as inflation has breached the upper bound of 6%.

Indian Trade deficit was reported at USD 4.8 bn, as against a surplus of 0.8 bn in June. However, the deficit was lower compared to July 2019. Exports declined 10.2% y/y to USD 23.6 bn, and Imports declined 28.4% y/y to USD 28.5 bn. In Apr-July period, trade deficit stood at USD 13.9 bn (USD 59.4 bn in the same period last year), with exports at USD 75 bn (down 30.2% y/y) and Imports at 88.9 bn (down 46.7% y/y).

FII’S have nett bought Rs 33386 Cr of Indian Equities in August till date . FII’S have nett sold Rs 202 Cr of Indian debt securities in August till date. In FY 19-20, FII’s have sold Rs 10200 Cr of Equities and 47393 cr of debt.

Global developments:USD is set to climb against majors as Euro data has softened with French manufacturing back in contraction mode. Flash PMI surveys from many countries were on the softer side.

Fed and ECB sounded very cautious regarding economic outlook in their minutes. ECB warned that “recent positive market developments were not fully backed by economic data”. They might be based on “overly optimistic expectations” about the Next Generation EU recovery package, and progress on vaccine development.

Fed minutes said “a number” of Fed members thought it would be helpful to make a revised statement on its policy strategy at some point, without providing details or timing. USD gained as Fed did not provide new clues on a further dovish stance.

US Equity indices were volatile with profit booking at higher levels. Fed’s cautious stance on further monetary support disappointed expectations. US Congress is still deadlocked on fiscal support and Fed is convinced that economic recovery will be fragile without fiscal support.

Next week focus would be on US income and spending data and Fed Chairman’s speech.

Important developments in coming week:US spending data and Fed Chairman’s speech..

Currency range forecast:USDINR:74.50(support)-75.50(Resistance),EURINR: 86(support)-89.50(Resistance), GBPINR: 96(support)-99(Resistance), JPYINR: 69-71.50.

Suggestion: Cover USD import payables on decline to 74.70.USD receivables can be hedged at 75.05+.EURINR payables can be hedged at 87/86. EURINR receivables hedging can be considered partially at 89+ and again at 91. GBPINR receivables hedging can be part done at 98+. 

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