Currency Map:

USD/INR 73.55 73.57 -0.025
EUR/INR 89.67 90.12 -0.49
GBP/INR 99.73 99.28 0.45
JPY/INR 71.05 71.21 -0.22

Brent Crude closed at USD 52.30 VS prior week close of USD 51.40. Gold closed at USD 1883.Nifty closed at 13750 vs prior week close of 13760.10 Year G-SEC Yield closed at 5.97%.

Major developments: USDINR traded in the 73.52-73.96 range and closed at 73.55as against prior week close of 73.57, almost a flat close on w/w. EUR declined 0.49% and GBP climbed 0.45% against Rupee. Indian benchmark Equity indices closed flat w/w. 10 Year G-SEC Yield closed at 5.97%.

Rupee continued to trade in a tight range, unmoved by deluge of FII flows. RBI increased its FX reserves to USD 581 bn.FII’S nett bought Rs 47510 Cr ofIndian Equities in Dec . FII’S nett bought Rs 3314 Cr of Indian debt securities in Dec . In this financial year, FII’S have nett bought Rs 206420 Cr of Equities and have sold Rs  23156 Cr in debt. In FY 19-20, FII’s sold Rs 10200 Cr of Equities and 47393 cr of debt.

Rupee and Equity markets were jolted mid week on reports of a more severe variant of Corona virus spreading in UK. However, vaccine makers have assured that the vaccines can immunise against new variants also.

On positive note, RBI noted in its recent bulletin that economy is recovering at an unforeseen pace. Equity markets continued to exhibit resilience due to vaccine hopes, liquidity, economic recovery and FII flows.

Global developments:

Important developments in coming week: As markets headed to long week end, there was a positive new from Europe. UK and EU announced the much awaited trade deal after 4 years of procedural wrangles. UK is now effectively out of EU policies and the uncertainty has ended. GBP gained past 1.35 against USD, on expectation of this deal.

USD is ending the year on a weak footing due to ultra-loose monetary policy by Fed, increase in fiscal and trade deficit and lower demand for safe assets due to vaccination against corona.

US President has refused to sign USD 2.3 trn stimulus package passed by US Congress and Senate, claiming that unemployment benefit of USD 600 is very low and has asked lawmakers to increase it to USD 2000. Without his assent, US Govt spending will dry, forcing shutdown.

UK Q3 GDP was estimated to have increased by a record 16.0% qoq in Q3, revised up from first estimate of 15.5%. Over the year, GDP dropped -8.6% yoy. 

US GDP grew at an annualized rate of 33.4% in Q3, revised up from 33.1%. 

The overall theme in financial markets is that the negative effect of even a Global pandemic can be neutralised by Liquidity and fiscal stimulus.It seems that even a global pandemic is no match for extravagant government spending and rock-bottom interest rates.

Currency range forecast: USDINR:73.40(support)-73.95/74.40(Resistance), EURINR: 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 73.40. USD receivables can be hedged at 73.95+.EURINR payables can be hedged on decline to 89.60/88.80. GBPINR receivables hedging can be done.

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