Currency Map:

USD/INR 75.02 74.35 0.90
EUR/INR 90.45 89.06 1.56
GBP/INR 104.12 102.46 1.62
JPY/INR 69.53 68.33 1.75

Brent Crude closed at USD 66 VS prior week close of USD 63. Gold closed at USD 1777.Nifty closed at 14341 vs prior week close of 14617. 10 Year G-SEC Yield closed at 6.06%.

Major developments: USDINR traded in the 74.62-75.33 range and closed at 75.02 as against prior week close of 74.35. Rupee declined 0.90% w/w. EUR climbed 1.56% and GBP climbed 1.62% w/w against Rupee. Indian benchmark Equity index declined 2.21% w/w. 10 Year G-SEC Yield closed at 6.06%. In April till date, FII’S have sold Rs 6980 Cr worth of Indian Equities and have sold Rs 448 Cr worth of Indian debt.in 2020-21 financial Year, FII’S nett bought Rs 2,74,203 Cr of Equities and have sold Rs  42820 Cr in debt. FX reserves climbed USD 1.92 bn to USD 582.40 as on April 16 th.

Rupee wobbled and weakness was stemmed by RBI intervention. Rising infections and regional lock downs are weighing down on Rupee and Equity markets. There were no major economic data releases. Focus was only on Covid crisis and corporate earnings.  Indian PM said that lock down should be a last resort and asked states to focus on testing and micro containment strategy. Indians above 18 can get vaccinated soon.

USDINR is expected to trade in 74.30-75.50 range for some more time. Rupee’s decline and subsequent rise will depend on infection path and RBI’S intervention. If infection peaks in May, Rupee decline could get halted in May/June. However, there is a fear of Rupee breaching 77, should RBI step aside. USDINR 1 Year fwd premia is now at 4.57%. Indian WPI inflation climbed steeply to 7.39% in March, up from 4.17% in Feb.

Global developments: Euro surged on upbeat comments by ECB Chief. EU PMI data was strong enough to support EURO climb. With US Yields also softening, Euro could test 1.23+, enroute to 1.25.

US data was rather thin and markets shrugged off US President’s likely proposal to increase taxes on higher income group and also fund stimulus with increase in capital gains tax. US First quarter GDP and FOMC meeting are key events in coming week.

ECB left monetary policy unchanged and “reconfirmed its very accommodative monetary policy stance”. Main refinancing rate, marginal lending facility rate, and deposit rate are held at 0.00%, 0.25%, and -0.50% respectively. The pandemic emergency purchase programme (PEPP) will continue with an envelope of EUR 1850B, “until at least the end of March 2022”. It also expects PEPP to be carried out at a “significantly higher pace” during the current quarter. ECB Chief said that while Eurozone real GDP could have contracted again in Q1, data pointed to a “resumption of growth” in Q2. Progress with vaccinations, should “pave the way for a firm rebound in economic activity in the course of 2021”.

Currency range forecast: USDINR:74.30(support)-75.35(Resistance), EURINR: 88.50(support), 92.30 (Resistance), GBPINR: 102(support), 105.15- Resistance, JPYINR: 68-70.                         

Suggestion: Cover USD import payables on decline to 74.65/74.30. USD receivables can be hedged at 75.30. EURINR receivables can be hedged on rally to 92.30+. GBPINR receivables hedging can be done at around 105.

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