Currency Map:

USD/INR 72.65 72.75 -0.13
EUR/INR 87.71 88.08 -0.42
GBP/INR 101.63 100.32 1.30
JPY/INR 68.83 69.33 -0.72

Brent Crude closed at USD 62.72 VS prior week close of USD 62.66. Gold closed at USD 1783.Nifty closed at 14981 vs prior week close of 15163. 10 Year G-SEC Yield closed at 6.13%.

Major developments: USDINR traded in the 72.57-72.93 range and closed at 72.65 as against prior week close of 72.75, registering gain of 0.13 % w/w. EUR declined and GBP climbed against Rupee. Indian benchmark Equity index declined 1.2% w/w. 10 Year G-SEC Yield closed at 6.13%.

Rupee gained to 72.57 last week, as flows continued. Fwd premia remained high. 1 Year fwd premia climbed to 5.08% p.a. FII flows intensified after budget. Rupee gains is stemmed by USD buying by PSU banks.

FII’S nett bought Rs 26336 Cr of Indian Equities in Feb . FII’S nett sold Rs 692 Cr of Indian debt securities in Jan . In this financial year, FII’S have nett bought Rs 256983 Cr of Equities and have sold Rs  25886 Cr in debt. In FY 19-20, FII’s sold Rs 10200 Cr of Equities and 47393 cr of debt.

On data front, Exports rose 6.16% to $27.45 billion in January, while imports also grew 2% to $42 billion. Trade deficit was reported at 14.55 bn.

USDINR is expected to slide to 72.30 levels as flows remain robust. On Friday, it was trading below 72.60 in overseas NDF markets. Expect USDINR to trade in 72.40-72.90 range in coming week.

Global developments: US 10 Year yield spiked to 1.34% on hopes of economic recovery in US and hardening of prices due to stimulus package. Strength in US retail sales and overall manufacturing data from EU and US indicates revival of consumer confidence due to vaccination and direct employment benefits. Service industry continues to take a hit due to lock down restrictions.                                                                         

FOMC minutes for the January meeting revealed that policymakers were cautiously optimistic over the economic outlook. Meanwhile, it also dampened hopes of tapering. The minutes reaffirmed the guidance that asset purchases would continue at the current pace “until substantial further progress toward its employment and inflation goals had been achieved”.  

Japanese GDP grew 12.7% annualized in Q4, well above expectation of 9.5%. On quarterly terms, GDP grew 3.0% qoq, beat expectation of 2.3% qoq.

Crude Oil surged and metal prices hardened even further.

Currency range forecast: USDINR:72.40(support)-72.90(Resistance), EURINR: 87.10(support), 88.50 (Resistance), GBPINR: 100.50(support)102.50- Resistance, JPYINR: 68.50-70.                         

Suggestion: Cover USD import payables on decline to 72.40. USD receivables can be hedged at 72.90. EURINR payables can be hedged on decline to 87.50. GBPINR receivables hedging can be done at around 102.50.

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