FX RATES AND USDINR FWDS :
FX Rates and USD INR Forward Rate December 14, 2023
Major developments:
USD is now at 83.31. USDINR opened at 83.28. Fwd premia – 1 year fwd premia is at 1.73% p.a.
-Fed has signaled rate hike and has indicated 3 rate cuts next year.
-US inflation is expected to moderate to 2.4% next year and GDP could soften to 1.4%.
-USD declined as 10 Year yield slumped to 3.98% and Equities surged.
-USDINR fwd premia has inched higher to 1.73% annualized for 1 year on the back of US Yields drop.
-ECB and BOE meetings are focus events for the day.
USDINR outlook: USDINR is kept range bound by RBI. Three positives for Rupee are
1) US rate may have peaked, 2) Crude has declined below USD 75, 3) Robust FII inflows. FII inflows have invested Rs 1.4 lac in this calendar year.
Negatives: 1) Possibility of Yuan decline and hence Asian FX could fall due to Chinese economic worries. Considering next year election, RBI may not allow Rupee to create headlines and increase inflation due to fall. Hence, expect RBI to be active on both sides. However, due to the first three reasons, threat for bigger Rupee fall seems to have receded significantly.
The caveats are : 1) Chinese Yuan movement, 2) ECB’S rate decisions. If ECB is forced to act more quickly than Fed in projecting next year rate cuts, USD could climb back. However, due to uncertain nature of USD- Euro interest rate differentials, expect consolidation in USD index offering two way range bound movement and not pose any threat to Rupee. Based on the above expectations, Exporters can hedge at around 83.40 and importers can hedge in the 83.05-83.25 zone.
Fwd premia is expected to climb higher as US Yields retrace more than Indian Yields. 1 Year fwd premia has jumped 10 bps today to 1.73% and this could gradually climb above 2% in coming months, offering better incentive for exporters.
RBI rates
| Trade Date | 1 USD | 1 GBP | 1 EUR | 100 YEN |
| 13-Dec-23 | 83.39 | 104.65 | 89.93 | 57.2 |
-USDINR is at 83.31.Prior day’s close was 83.40.
-Indian Equity indices climb.
-Indian 10 year G-SEC yield is at 7.21%.
-USDINR 1 yr fwd premia is at 1.72%.
USDINR @ 83.31, EUR/USD@ 1.0902, GBP/USD @ 1.2638, USD/JPY @ 141.62, EUR/INR @ 90.81, GBP/INR @ 105.29, JPY/INR @ 58.81. Gold@2031, Brent Crude @ 74.50, Nifty @ 21170(+243), 10 Year G-SEC @ 7.21%.
Hedging:
USDINR payables can be hedged on dips to 83.24/83.18 . Eur receivables can be hedged now. GBPINR receivables can be hedged now.
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