WEEKLY SYNOPSIS: 19/03/2021

Currency Map:

Brent Crude closed at USD 64.55 VS prior week close of USD 69.20. Gold closed at USD 1743.Nifty closed at 14744 vs prior week close of 15030. 10 Year G-SEC Yield closed at 6.19%.

Major developments: USDINR traded in the 72.37-72.78 range and closed at 72.51 as against prior week close of 72.79. Rupee registered gain of 0.38 % w/w. EUR and GBP declined against Rupee. Indian benchmark Equity index declined 1.9% w/w. 10 Year G-SEC Yield closed at 6.19%.

Rupee gained due to IPO related inflows. USDINR fwd premia is hovering at around 4.95% p.a. for 1 year. Rupee is gaining despite high crude oil price and USD strength against Euro. US Yield spike is yet to trigger weakness in Rupee.

FII’S nett bought Rs 22373 Cr of Indian Equities in Mar (as on 18/3) . FII’S nett sold Rs 8723 Cr of Indian debt securities in March (as on 18/3) . In this financial year, FII’S have nett bought Rs 280938 Cr of Equities and have sold Rs  39347 Cr in debt. In FY 19-20, FII’s sold Rs 10200 Cr of Equities and 47393 cr of debt.

USDINR is expected to trade in 72.30-73.80 range for some more time. Upside break of 73.80 could herald a fresh wave of Rupee selling. This could happen only if US yields rally remains unabated. To tame inflation due to rally in Crude prices, RBI may desist from aggressive intervention.                                                                                   

Global developments: Financial markets remained volatile and Crude prices slumped on worries over slow pace of vaccinations in EU and Asia. Fed was upbeat on growth with assurance to keep rates low till end of 2022. USD was higher against Euro and Pound. US Yields continue to harden and has contributed to USD climb against Yen and Euro.

Fed kept monetary policy and rates unchanged and projected a rapid jump in U.S. economic growth this year as the COVID-19 crisis eases. A surge in inflation is expected to be temporary. US GDP is expected to climb to 6.5% this year and inflation could climb to 2.4%.

German GDP is expected to contract by -2% in Q1 due to rise in infections.

Japanese export dropped -4.5% yoy to JPY 6038B in February, much worse than the expectation of -0.5% yoy. Imports rose 11.8% yoy to JPY 5821B, slightly below expectation of 11.9% yoy.

BOE maintained status quo and expects strong economic recovery towards close of 2021.

Focus will be on US spending and PCE data. Mfrg surveys will also be in focus.

Currency range forecast: USDINR:72.30(support)-73.80(Resistance), EURINR: 85.50(support), 87.50/88.10 (Resistance), GBPINR: 99.50(support), 101.80- Resistance, JPYINR: 64-68.30.                         

Suggestion: Cover USD import payables on the decline to 72.40. USD receivables can be hedged at 72.80/73.25. EURINR receivables can be hedged on a rally to 87.50/88. GBPINR receivables hedging can be done at around 102.50.

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