FX – WEEKLY UPDATE :

WEEKLY SYNOPSIS: 25/06/2021

Currency Map:

Currency Pairs WEEKLY CLOSE PRIOR WEEK CLOSE % change
USD/INR 74.19 73.86  0.45
EUR/INR 88.60 88.02  0.65
GBP/INR 103.18 102.68  0.48
JPY/INR 66.97 66.99  

Brent Crude closed at USD 76 VS prior week close of USD 73.20. Gold closed at USD 1781.Nifty closed at 15860 vs prior week close of 15683. 10 Year G-SEC Yield closed at 6.03%.

Major developments: USDINR traded in the 74.05-74.40 range and closed at 74.19 as against prior week close of 73.86. Rupee declined 0.45% w/w. EUR climbed 0.65% and GBP climbed 0.48% w/w against Rupee. Indian benchmark Equity index declined 1.12% w/w. 10 Year G-SEC Yield closed at 6.03%. 1 year fwd premia is at 4.42% p.a. In June till date, FII’S have net bought Rs 3162 cr in Equity segment and have net sold Rs 2962 cr of debt. In this financial year, FII’S have net bought Rs 3611 Cr worth of Indian Equities and have sold Rs 2962 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.

Rupee had s subdued trading range last week after a big move in previous week. Fwd premia was steady in the 4.35-4.45% p.a. range for 1 year.  With Fed tilting towards QE tapering, Rupee is set to decline further with intermediate corrections. However, RBI could intervene due to negative impact of Rupee weakness on imported inflation. USDINR is set to trade in the 73.50-74.60 range with bias towards 74.60+. There were no major data release last week. Indian Equity indices whipsawed, but climbed higher on w/w basis.

Global developments: The week was dominated by US inflation theme and Fed speakers assessment about future direction of monetary policy. US President’s infrastructure plan was the next dominating theme. Concern over rising inflation and its implications for Fed policy led to a rise in financial volatility last week.  Fed speakers were mixed in their messages with Fed Chairman showing more patience on inflation.

US Fed Chairman said the economy has shown “sustained improvement” with real GDP on track to posts its “fastest rate of increase in decades”. Labor market has “continued to improve”, but the pace has been “uneven”. Unemployment rate remained “elevated” at 5.8%. But job gains should “pick up in coming months” as vaccination rise. Powell also reiterated that as the “transitory supply effects abate, inflation is expected to drop back toward our longer-run goal”.

EU PMI data indicates that the economy is booming at a pace not seen for 15 years as businesses report surging demand, with the upturn becoming increasingly broad-based, spreading from manufacturing to encompass more service sectors, especially consumer-facing firms. The data set the scene for an impressive expansion of GDP in the second quarter to be followed by even stronger growth in the third quarter.

BoE left Bank Rate unchanged at 0.10% by unanimous vote. BoE said that the “existing stance of monetary policy remained appropriate” to meet the 2% inflation target and to sustain growth and employment. Bank staff have “revised up” Q2 GDP growth expectation by 1.50% since the May MPR, as restrictions on economic activity have eased. CPI inflation is expected to “pick up further above the target” and is “likely to exceed 3% for a temporary period”. 

US employment data, OPEC meeting and US infrastructure spending bill will be the focus in upcoming week.

Currency range forecast: USDINR:73.55(support)-74.60(Resistance), EURINR: 87.50(support), 89/89.50(Resistance), GBPINR: 102(support), 104- Resistance, JPYINR: 66.50-69.                         

Suggestion: Cover USD import payables on dips to 73.80. EURINR receivables can be hedged closer to 89. GBPINR receivables hedging can be done at around 103.50.

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