FX – WEEKLY UPDATE :

WEEKLY SYNOPSIS: 

Currency Map:

Currency Pairs WEEKLY CLOSE PRIOR WEEK CLOSE % change
USD/INR 74.41 74.56  -0.20
EUR/INR 87.58 88.14 -0.63
GBP/INR 102.28 103.10 -0.79
JPY/INR 67.37 67.75 -0.56

Brent Crude closed at USD 74.20 VS prior week close of USD 73.15. Gold closed at USD 1802.Nifty closed at 15856 vs prior week close of 15923. 10 Year G-SEC Yield closed at 6.15%.

Major developments: USDINR traded in the 74.33-74.95 range and closed at 74.41 as against prior week close of 74.56. Rupee gained 0.20% w/w. EUR declined 0.63% and GBP declined 0.79% w/w against Rupee. Indian benchmark Equity index declined 0.4% w/w. 10 Year G-SEC Yield closed at 6.15%. 1 year fwd premia is at 4.48% p.a. In July, FII’S have net sold Rs 4569 cr in Equity segment and have net sold Rs 1143 cr of debt. In this financial year, FII’S have net bought Rs 4482 Cr worth of Indian Equities and have sold Rs 5278 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. Indian FX reserves climbed to USD 611 bn.

Rupee had a 60 ps range last week. Rupee’s gains are stalled due to RBI’S intervention. Robust and lumpy IPO related inflows are being absorbed by RBI. Fwd premia was steady in the 4.45% p.a. range for 1 year.  Indian Equity indices had a roller coaster ride, tracking Global markets. Markets have shrugged rising inflation and Global resurgence in corona cases. Q1 Corporate results are in line with expectation.   

USDINR could trade in the 73.90-75 range. However, it has to break 74.40 to pick steam for a climb to 73.90. USDINR movement will be linked to USD performance against majors and Asian peers and RBI’S action.

Global developments: Fed meeting, US GDP data, US tech companies’ earnings and Core PCE index are the focus events for the upcoming week. US GDP growth forecast ranges from 7% to 9%. Markets will also watch Fed’s statement on QE tapering and their assessment of growth and surge in Delta variant cases.

EURO slipped further as ECB maintained dovish stance. ECB maintained status quo on rates and QE purchases. ECB pledged to keep all key interest rates “at their present or lower levels until it sees inflation reaching 2% well ahead of the end of its projection horizon and durably for the rest of the projection horizon”. As indicated in the new Monetary Policy Statement, Eurozone’s outlook has remained broadly unchanged since the June meeting with growth on track to be strong in the second and third quarters.

Global markets recovered as swiftly as they fell early last week, triggered by worries over resurgence of Corona cases. US indices closed 1.5% higher w/w. Rise in infections could affect supply chain, create labor shortages and hence cause a fall in output, despite buoyant demand.

Currency range forecast: USDINR:74.40/73.90 (support)-74.90(Resistance), EURINR: 87.50(support), 88.50(Resistance), GBPINR: 102(support), 104- Resistance, JPYINR: 66.50-69.                         

Suggestion: Cover USD import payables on dips to 74.24/73.90. EURINR receivables can be hedged closer to 88.30. GBPINR receivables hedging can be done at around 103/103.50.

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