Currency Map:

USD/INR 71.40 71.35 0.07
EUR/INR 78.49 79.38 -1.12
GBP/INR 92.59 94.46 -1.97
JPY/INR 65.05 65.82 -1.16


Brent Crude closed at USD 54.45 VS prior week close of USD 58.15

Nifty closed at 12098 vs prior week close of 11962.

10 Year G-SEC Yield closed at 6.45%.

Major developments: USD/INR traded in the 71.09-71.65 range. It closed at 71.40, registering a nominal gain of 5 ps for USD. EURINR declined 1.12% and GBPINR declined 1.97%.

USDINR pair has established a trading range of 70.50-72.25. The pair could continue to trade till a forceful issue triggers a one way movement. RBI has been buying USD to stem Rupee gains. FX reserves has swelled to USD 471 bn, up from USD 418 bn in last March.

Equity markets recovered to reclaim budget day losses. Yields fell after RBI policy. Last week movement was dominated by RBI policy and coronavirus.

RBI left rates unchanged and stance accommodative. Growth forecast for 2020-21 fiscal has been downgraded to 6% from 6.5%. First half may witness growth of 5-5.5%, Q3 will see growth climbing to 6.2%. Inflation forecast has been revised upwards to 5-5.4% in H1 20-21. Q3 20-21 inflation may trend down to 3.2%. Higher onion prices have contributed to 2% in headline inflation and 3.8% in Food inflation.

RBI Governor said that MCLR- Credit market rate transmission has been 55 bps as against 135 bps rate cut by RBI. In longer term rates, transmission has been 75 bps. In G-SEC, transmission has been 175-195 bps.

RBI also announced that CRR will not be imposed on incremental loans from Jan 31 st till July 31 st, for loans to auto, MSME’S and housing projects.                 

Indian G-SEC yields softened as RBI Governor said that longer term repo will be conducted to ensure that yields remain soft.

Focus is on Indian IIP and CPI data.

FII’S nett sold  Rs 1172 Cr of Indian Equities in Feb till date . FII’S have nett bought Rs 4248 Cr of Indian debt securities in Feb till date.

Global developments: Global markets climbed higher on strong macro-economic data from US and EU and on fading fears of negative impact of coronavirus.

US ISM and jobs data were robust. USD climbed higher on the back of strong US data. Crude Oil slumped to USD 55, prompting OPEC to consider further production cuts. The coronavirus outbreak continued to disrupt trade and supply chains, impact financial markets, and force multinational companies to make production decisions with limited information.

US non-farm payroll employment rose 225k in January, much better than expectation of 156k. Unemployment rate rose to 3.6%, up from 3.5%, above expectation of 3.5%. Average hourly earnings, missed expectation and grew only 0.2% mom, below consensus of 0.3% mom.

ECB bulletin noted that Eurozone expansion will continue to be supported by “favourable financing conditions”. Risks remain “titled to the downside” in Eurozone due to” geopolitical factors, rising protectionism and vulnerabilities in emerging market economies”. But the risks have “become what less pronounced”.

Focus is on US retail sales, CPI data.

Important developments in coming week: Indian IIP,CPI and US retail sales and CPI.                      

Currency range forecast for coming week:

USDINR: 71-71.65, EURINR: 77.70-78.60, GBPINR: 91.75-93.25, JPYINR: 64.50-66.50.

Suggestion: Cover 1 month USD import payables on decline to 71.10. USD receivables can be hedged at 71.65. 1 M EURINR payables can be hedged now at 77.80. EURINR receivables can be hedged closer to 79. GBPINR receivables hedging can be done on any rally to 93.25.

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