FX – WEEKLY UPDATE :
FX Weekly Currency Score Week 14
Currency Map:
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Currency Pairs |
MARCH 2024 CLOSE |
MARCH 2023 CLOSE |
% change |
|
USD/INR |
83.38 |
82.18 |
1.46 |
|
EUR/INR |
89.95 |
89.05 |
1.01 |
|
GBP/INR |
105.23 |
101.32 |
3.85 |
|
JPY/INR |
55.07 |
61.85 |
-10.95 |
Brent Crude closed at USD 87.65 VS previous March close of USD 80.25. Gold closed at USD 2232. Nifty closed at 22326 vs prior March 2023 close of 17359. 10 Year G-SEC Yield is now at 7.05%.
Major developments: USDINR traded in the 81.61-83.70 range in FY 23-24 and closed at 83.38, gain of Rupee One and twenty ps for USD as compared to prior year close of 82.18. EUR climbed 1.01% y/y and GBP climbed 3.85% y/y against Rupee. Indian benchmark Equity climbed 28.5% y/y. 10 Year G-SEC Yield closed this week at 7.05%. 1-year fwd premia is at 1.57% p.a.
Rupee movement was controlled by RBI with intervention on both sides. This is evident from the tight range and accretion in FX reserves. RBI guided Rupee’s decline along with fwd curve. The decline of 1.46% y/y, matches closely to one year fwd premia. USD index gained 1.93% y/y and was also stuck in a tight range. RBI’s action also matches with broad and steady USD gains against majors.
In March, FPI’S bought Rs 32927 Cr of Equities and bought Rs 13818 Cr of debt . In FY 23-24, FII’S have net bought Rs 206279 Cr of Equities and have net bought Rs 123120 Cr of debt.
FX reserves stood at USD 642.36 bn, as on March 22 nd. Reserves increased by USD 64 bn as compared to March 2023.
USDINR movement for FY 24-25 will depend on Global factors, particularly USD and Euro interest rate paths, Chinese Currency fluctuations and Crude price movement. With USD expected to gain due to better economic growth compared to EU, Rupee may move down by 2% as RBI may prefer a gradual decline .Indian economic fundamentals are robust and inflows are likely to remain strong. CAD is expected to decline to 1% of GDP. GDP growth is expected to be 7%+ and inflation may average around 5%.
Indian CAD declined to 1.2% of GDP (USD 10.5 bn) in Q3 FY 24. This was against USD 16.8 bn in same period last year. Merchandise deficit rose marginally to USD 71.6 bn as against USD 71.3 bn during the same period last year. FDI inflows shrunk sharply to USD 8.5 bn in Apr-Dec period as against USD 21.6 bn during the same period in FY 22-23. FPI inflows rose to USD 12 bn in Q3 as against USD 4.6 bn in Q3 FY 22-23.
USDINR is expected to move lower to 84.10 with supports at 83.20/83.
Hedging advise: Imports be hedged closer to 83.20.
Global developments: There were no major developments last week. US spending data showed that the economy continues to be resilient. US Personal income climbed 0.3% m/m, spending rose more than expected by 0.8% m/m. PCE price index rose 0.3% mom below expectation of of 0.4% mom. Core PCE price index (excluding food and energy) rose 0.3% mom, matched expectations. Over the 12-month period, PCE price index accelerated from 2.4% yoy to 2.5% yoy, matched expectations. Core PCE price index slowed from upwardly revised 2.9% yoy to 2.8% yoy, matched expectations.
US economy continues to be resilient with robust labor market and strong Consumer spending. Risks remain skewed to the upside for the economy, inflation and interest rates. The labor market expanded by an average of 265k jobs (SAAR) in the three months through February.
Focus is now on US labor data. Strong US labor data would dash hopes of June rate cuts and push back expected rate cuts from 3 to 2 this year.
Currency technical levels: USDINR: 83.20 (Supports), 83.70/84.10 (resistance),
EURINR:90.75/91.20(Resistance)
GBPINR: Supports: 104( supports), Resistance:106.75/107.80(
JPYINR: Resistance:56.50/57.60, Supports: 54.60 (support).
Hedging advise: USDINR imports be hedged on decline to 83.20. EUR nearby payables be covered at 89.50. Receivables can be covered. GBP receivables can be covered at 106+.
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