WEEKLY SYNOPSIS:
Currency Map:
| Currency Pairs | WEEKLY CLOSE | PRIOR WEEK CLOSE | % change |
| USD/INR | 73.57 | 73.65 | -0.10 |
| EUR/INR | 90.12 | 89.24 | 0.98 |
| GBP/INR | 99.28 | 97.36 | 1.97 |
| JPY/INR | 71.21 | 70.81 | 0.56 |
Brent Crude closed at USD 52.30 VS prior week close of USD 50. Gold closed at USD 1887.
Nifty closed at 13760 vs prior week close of 13513.
10 Year G-SEC Yield closed at 5.96%.
Major developments: USDINR traded in the 73.39-73.67 range and closed at 73.57 as against prior week close of 73.65, gain of 0.10% for Rupee w/w. EUR climbed 0.98% and GBP climbed 1.97% against Rupee. Indian benchmark Equity indices climbed 1.82% w/w basis. 10 Year G-SEC Yield closed at 5.96%.
Rupee was stuck in a small trading range, buffeted between strong inflows and USD accumulation by RBI. Equity markets rallied further notwithstanding rich valuation levels. Vaccine hopes, declining covid infections, Global and domestic liquidity and continued economic recovery have kept markets buoyant. FII inflows is unabated as India continues to attract large amount of FDI and FII funds.
CPI inflation declined to 6.93% in November 2020, compared with 7.61% in October 2020. Food inflation dipped to 8.76%.Core CPI inflation rose slightly to 5.51% in November 2020 compared with 5.46% in October 2020. The cumulative CPI inflation has moved up to 6.87% in April-November FY2021 compared with 3.73% in April-November FY2020.
FII’S nett bought Rs 39725 Cr of Indian Equities in Dec . FII’S nett bought Rs 5962 Cr of Indian debt securities in Dec . In this financial year, FII’S have nett bought Rs 198635 Cr of Equities and have sold Rs 25804 Cr in debt. In FY 19-20, FII’s sold Rs 10200 Cr of Equities and 47393 cr of debt.
Global developments: Global market developments were dominated by vaccine, US stimulus details and Brexit talks.
Despite lock down, major economies are showing resilience as evidenced by strong PMI data and business surveys. However, retail sales has lost momentum and could affect future manufacturing data. Financial markets ignored near term problems and focused on stimulus package and vaccine hopes.
USD was weak against majors due to risk on mode in financial markets.
US has started vaccinating, following UK’S vaccination process. US has now authorised Moderna vaccine in addition to Pfizer. Pandemic continues to rage in US with many states in full lock down.
German economic institute Ifo said: “Companies were more satisfied with their current business situation. They were also less skeptical about the coming six months. While the lockdown is hitting certain sectors hard, overall the German economy is showing resilience.
Bank of Japan said that Japan’s economy is “likely to follow an improving trend” with gradual waning of COVID-19 impact. But pace of improvement is expected to be “only moderate”.
Federal Reserve kept rates unchanged Wednesday, and signaled that near-zero rates would continue through 2023 to support the next phase of the economic recovery as the vaccine rollout gets underway. Fed’s interest-rate outlook for 2020 through 2023 was 0.1%, unchanged from previous projections in September, the Fed’s Summary of Economic Projections showed. US economy is expected to contract by 2.4% in 2020, up from an estimate for 3.7% contraction previously. For 2021, the Fed expects the economy to grow by 4.2%, and 3.2% in 2022, up from previous estimates of 4% and 3% respectively.
BoE judged that “the existing stance of monetary policy remains appropriate”. Bank Rate was held unchanged at 0.10%. Total target stock of asset purchase were also kept at GBP 895B. Both decisions were unanimous. BOE noted that the roll out of coronavirus vaccines is “likely to reduce the downside risks to the economic outlook from Covid”.
Important developments in coming week: US final GDP, Personal income, spending and durables order.
Currency range forecast: USDINR:73.45(support)-73.95/74.40(Resistance), EURINR: 89.60/88.80(support), 91.20 (Resistance), GBPINR: 98(support) 100.20/101.20- Resistance, JPYINR: 69-72.
Suggestion: Cover USD import payables on decline to 73.45. USD receivables can be hedged at 74.30+. EURINR payables can be hedged on decline to 89.60/88.80. GBPINR receivables hedging can be done.
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