Currency Map:

USD/INR 75.04 74.42   0.83
EUR/INR 83.60 84.42  -0.97
GBP/INR 100.51 101.30 -0.78
JPY/INR 64.95 65.48 -0.71

Brent Crude closed at USD 89 VS prior week close of USD 87.75. Gold closed at USD 1782.Nifty closed at 17101 vs prior week close of 17617. 10 Year G-SEC Yield closed at 6.78%.

Major developments: USDINR traded in the 74.42-75.31 range and closed at 75.04 as against prior week close of 74.42. Rupee declined 0.83% w/w. EUR declined 0.97% and GBP declined 0.78% w/w against Rupee. Indian benchmark Equity index declined 2.89% w/w. 10 Year G-SEC Yield closed at 6.78%. 1 year fwd premia is at 4.55% p.a.

It was a volatile week for Rupee as Equities crashed, USD surged against majors and yields climbed. FII’S pulled out more than 30000 Cr in last few sessions. Higher US Yields and phased Global liquidity withdrawal may have influenced FII’S decision to cut exposure on rich valuations. Crude remained high as Russia- Ukraine tensions escalated. Rupee’s fall was checked by IPO inflows. LIC is likely to come out with its IPO in March. Focus is now on budget and its impact on markets and USDINR.

In Jan, FII’S have net sold Rs 27506 cr in Equity segment and have net bought Rs 3615 cr of debt. In this financial year, FII’S have net sold Rs 32722 Cr worth of Indian Equities and have bought Rs 6508 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: Fed meeting last week overshadowed other major data releases and developments as it delivered its clearest signal on imminent rate hikes starting from March.

Fed said in a statement that it may “soon” be appropriate to raise rates, and confirmed plans to end its bond purchasing program in early March.     

“With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate,” the Fed said in a statement. 

In his press conference that followed the Fed decision, Powell said there was “quite a bit of room to raise rates without hurting jobs and that “the economy no longer needs sustained high levels of monetary policy support,” and that “it will soon be appropriate to raise” rates.

US GDP grew by 6.9% annualized in last quarter of last fiscal. On the whole, US GDP climbed 5.7% in 2021, fastest since 1984. In 2020, GDP declined by -3.4%. Personal income and Core PCE index data were softer than expected.

Concerns about future monetary tightening contributed to stock market volatility this week. Ultimately, the pace of rate hikes will depend on the pandemic, global supply chains and how aggregate demand reacts to higher rates.

Focus turns to US employment data, ISM(mfrg and non mfrg) and ECB, BOE monetary policy decisions.

German GDP dropped -0.7% qoq in Q4, worse than expectation of -0.2% qoq. GDP was still -1.5% lower than pre-pandemic level in Q4, 2021. For whole of 2021, GDP grew 2.8%.

USD surged, as EURUSD broke the 1.12 levels. USD also rallied against Yen. EURUSD is heading towards 1.10 levels.

Currency range : USDINR: 74.70( support), 75.60 (resistance), EURINR: 82.50 (support)/ 84.50 (Resistance), GBP/INR: 100-102.50, JPY/INR:63.50-65.50.

Suggestions: USD exports can be covered from 75.50. EURINR exports can be covered at around 84.50+. GBPINR exports can be covered at 101.50+

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