FX – WEEKLY UPDATE

WEEKLY SYNOPSIS: 25/02/2022

Currency Map:

Currency Pairs WEEKLY CLOSE PRIOR WEEK CLOSE % change
USD/INR 75.29 74.66 0.84
EUR/INR 84.37 85.16 -0.92
GBP/INR 101.02 101.96 -0.92
JPY/INR 65.32 65.04 0.43

Brent Crude closed at USD 94.50 VS prior week close of USD 92. Gold closed at USD 1890.Nifty closed at 16658 vs prior week close of 17276. 10 Year G-SEC Yield closed at 6.74%.

Major developments: USDINR traded in the 74.35-75.65 range and closed at 75.29 as against prior week close of 74.66. Rupee declined 0.84% w/w. EUR declined 0.92% and GBP declined 0.94% w/w against Rupee. Indian benchmark Equity index declined 3.57% w/w. 10 Year G-SEC Yield closed at 6.74%. 1 year fwd premia is at 4.10% p.a.

Rupee remained volatile, hit by Geo political tensions. War in Ukraine dragged Rupee down to 75.65. However, Rupee retraced its loss on Friday as markets digested the impact. RBI also seems to have sold USD at 75.30+. 1Year Fwd premia edged higher to 4.35% from 3.85% p.a., before settling at 4.10% p.a. RBI did Sell-Buy swap to drain liquidity ahead of LIC IPO. This triggered climb in fwd premia. Indian Q3 GDP is set for release. Oil price and Global developments are to be watched for USDINR move. However, the impact of Geo political situation may settle next week and thereby help Rupee gain futher.

In Feb, FII’S have net sold Rs 25270 cr in Equity segment and have net sold Rs 2054 cr of debt. In this financial year, FII’S have net sold Rs 57891 Cr worth of Indian Equities and have bought Rs 4454 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.

Global developments: Russian invasion of Ukraine and US/EU sanctions on Russia took a toll on Equity and Currency markets. While market reaction can be short lived, the economic and inflationary impact of the war and sanctions will play out depending on how soon the conflict ends. While, Russia remained in swift payment system, sanctions will cut Russia’s financing capability. But with Russia being a major producer of Oil and Natural gas, higher Oil prices will have serious inflationary impact and rate implications. Ukraine is also a major producer of wheat and sunflower oil seeds. EU may bear the brunt of economic implications. These developments will not deter Fed from its March rate hike, as it is already lagging the curve.

EUR/USD is stabilising despite Russian invasion. Unwinding of Euro shorts could lead to USD fall against majors.

US ISM and employment data are the key events for the week.

Currency range : USDINR: 74.95/74.70/74.40( support), 75.30/75.65 (resistance), EURINR: 84.10 (support)/ 85.20 (Resistance), GBP/INR: 100.50-102.50, JPY/INR:63.50-65.50.

Suggestions: USD exports can be covered on spike above 75.25+. EURINR exports can be covered at around 85.20/85.55+. Payables can be covered at 84.10.  GBPINR exports can be covered at 102+

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