FX – Weekly Update


Currency Map:

USD/INR 73.54 73.14 0.54
EUR/INR 86.97 86.75 0.25
GBP/INR 93.94 97.34 -3.5
JPY/INR 69.17 68.98 0.27

Brent Crude closed at USD 39.59VS prior week close of USD 42.03.

Nifty closed at 11464 vs prior week close of 11333.

10 Year G-SEC Yield closed at 6.05%.

Major developments: USDINR traded in the 73.03-73.75 range and closed at 73.54 as against prior week close of 73.14, decline of 0.54% for Rupee w/w. EUR climbed 0.25% and GBP declined 3.5% against Rupee. Indian benchmark Equity indices rallied 1.15% w/w basis. 10 Year G-SEC Yield closed at 6.05%.

Rupee gained to 73.15 on reports of USD 20 bn deal between Reliance retail and Amazon. As more FDI flows trickled in, Rupee gained to 73.15. PSU banks bought USD at around 73.20. GBP was the major loser as UK-EU deal hit major obstacles due to new UK internal marketplace law.

FII’S have nett sold Rs 1152 Cr ofIndian Equities in Sept till date . FII’S have nett bought Rs 1647 Cr of Indian debt securities in Sept till date. In this financial year, FII’S have nett bought Rs 85703 Cr of Equities and have sold Rs  39417 Cr in debt. In FY 19-20, FII’s have sold Rs 10200 Cr of Equities and 47393 cr of debt.

Indian auto sales climbed 14% in Aug 2020. Indian IIP and CPI are the focus data events for the upcoming week.

Global developments:US tech stocks declined steeply due to high valuations and concern on vaccine development as UK firm paused trial phase 3, due to illness in a volunteer. ECB meeting was the major focus event of last week.

ECB maintained status quo, but was upbeat on recovery. GDP is expected to contract by -8% this year as against -8.7% in last update. Headline inflation is expected to steady at 0.3% this year. The reading is expected to improve to 1% (up from +0.8% in June) in 2021 and 1.3% in 2022.

ECB President noted that “the incoming data since our last monetary policy meeting in July suggest a strong rebound in activity broadly in line with previous expectations”. She added that “domestic demand has recorded a significant recovery from low levels” but warned that “elevated uncertainty about the economic outlook continues to weigh on consumer spending and business investment”. ECB Chief also added that Euro strength’s impact on inflation will be carefully assessed, without committing on the present trend and strength of EURO.

Eurozone GDP contracted -11.8% qoq in Q2, slightly better than prior estimate of -12.1% qoq.Japan Q2 GDP contraction was revised down to -7.9% qoq, from -7.8% qoq. In annualized term, GDP contracted -28.1% versus preliminary reading of -27.8%.

US FOMC meeting and retail sales are the focus events of the upcoming week.

Important developments in coming week:  US Fed meeting and UK MPC..

Currency range forecast: USDINR: 72.70(support)-73.80/74.40(Resistance), EURINR: 86(support)-89.50(Resistance), GBPINR: 92(support)-96.50(Resistance), JPYINR: 68-71.

Suggestion: Cover USD import payables on decline to 72.70. USD receivables can be hedged at 73.80-74.40+.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 done on any rally.

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