FX – WEEKLY UPDATE :
FX Weekly Currency Score Week 8
Weekly SYNOPSIS: 16/02/2024
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|
Currency Pairs |
WEEK CLOSE |
PRIOR WEEK CLOSE |
% change |
|
USD/INR |
83.01 |
83.01 |
|
|
EUR/INR |
89.35 |
89.40 |
|
|
GBP/INR |
104.48 |
104.71 |
-0.21 |
|
JPY/INR |
55.26 |
55.55 |
-0.52 |
Brent Crude closed at USD 83.50 VS prior week close of USD 82. Gold closed at USD 2013. Nifty closed at 22040 vs prior week close of 21782. 10 Year G-SEC Yield is now at 7.09%.
Major developments: USDINR traded in the 82.99-83.12 range last week and closed at 83.01, unchanged for USD as compared to prior week close of 82.01. EUR closed flat w/w and GBP declined 0.21 w/w against Rupee. Indian benchmark Equity climbed 1.15% w/w. 10 Year G-SEC Yield closed this week at 7.09%. 1-year fwd premia is at 1.72% p.a.
In Feb, FPI’S have sold Rs 5515 Cr of Equities and bought Rs 13966 Cr of debt . In last calendar year, FII’S have net bought Rs 172853 Cr of Equities and have net bought Rs 70489 Cr of debt.
FX reserves stood at USD 617 bn, as on Feb 9 th.
Indian PMI Compiste indicator rose to 4 month high of 61. The overall level of business confidence rose to its second-highest mark in over a year during January, as manufacturers and service providers became more optimistic about the outlook. Notably, the level of positive sentiment in the manufacturing industry climbed to its highest in nearly nine- and-a-half years. PMI(mfrg) rose to 56.5 in Jan. PMI(services) rose to 61.8.
Jan CPI eased to 5.1% from Dec reading of 5.7%. Core inflation declined to 3.6%. Food inflation declined marginally to 8.3%.Dec IIP climbed 3.8%, up from Nov data of 2.4%.IIP grew 6.1% in Apr-Dec period. Mfrg grew by 3.9% in Dec. Mining and power sector growth cooled to 5.1% and 1.2% respectively.
Rupee continues to be range bound and is expected to trade in the 82.80-83.35 range for some more months. There is no clear theme in Global FX markets. However, with US inflation trending down in a sustained manner and with very little signs of negative impact of US tighter monetary policy on US growth and employment, Fed may bring forward rate cuts to second quarter. This may have positive implications for inflows into Indian debt and equity markets and support Rupee.
Hedging advise: Imports be hedged closer to 82.80. Exports be hedged closer to 83.17/83.35.
Global developments: USD continued to look strong as US CPI and PPI were stronger than expected. However, retail sales was subdued. Uneven progress in inflation is expected to hold Fed from considering rate cuts till May 2024.
US CPI rose 0.3% mom in January, above expectation of 0.2% mom. CPI core (all items less food and energy) rise 0.4% mom, above expectation of 0.3% mom.
UK data was very disappointing. Growth declined steeply. UK slipped into recession with GDP declining. UK GDP contracted -0.3% qoq in Q4, worse than expectation of -0.1% qoq. In FY 23, UK’s GDP saw a meager 0.1% growth, a stark contrast to 4.3% expansion in 2022.
According to European Commission’s Winter 2024 Economic Forecast, Eurozone’s GDP growth for 2024 was revised notably downwards to 0.8% from Autumn’s estimate of 1.2%, reflecting a more subdued outlook than previously anticipated.
ECB President highlighted that the “ongoing disinflation process” is expected to continue “gradually further down over 2024,” attributing this trend to the diminishing effects of past upward shocks and the impact of tighter financing conditions on inflation. She also noted a “gradual decline” in core inflation, which excludes energy and food prices, while also pointing out the “signs of persistence” in services inflation.
Japan’s economy also entered into technical recession as GDP unexpectedly contracted by -0.1% qoq in Q4, much worse than expectation of 0.3% qoq growth.
Focus is now US FOMC minutes.
Currency technical levels: USDINR: 82.80/82.65 (Supports), 83.18/83.35 (resistance),
EURINR:90.50(Resistance),88.
GBPINR: Supports: 104.10/103.70( supports), Resistance:105.30/106.50(
JPYINR: Resistance:57.25, Supports: 54.75 (support).
Hedging advise: USDINR imports be hedged on decline to 82.80. EUR nearby payables be covered. Receivables can be covered on pullback to 89.60/90.35. GBP receivables can be covered at 105.30/106+.
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