FX Weekly Update :

FX Weekly Currency Score Week 15

Currency Map:

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Currency Pairs	WEEK CLOSE	Last week CLOSE	% change
USD/INR	83.32	83.37	-0.05
EUR/INR	90.30	90.22	0.08
GBP/INR	105.24	105.29	-0.04
JPY/INR	55.15	55.09	0.10

Brent Crude closed at USD 91 VS previous prior week close of USD 876. Gold closed at USD 2329. Nifty closed at 22513 vs prior week close of 22326. 10 Year G-SEC Yield is now at 7.11%.

Major developments: USDINR traded in the 83.26-83.47 range last week and closed at 83.32, loss of 5 ps for USD w/w. EUR closed flat w/w and GBP closed flat w/w against Rupee. Indian benchmark Equity climbed 0.85% w/w. 10 Year G-SEC Yield closed this week at 7.11%. 1-year fwd premia is at 1.62% p.a.

Rupee gained back to 83.27 from its last month spike to 83.70. RBI’S two way action is likely to lock the pair in a range and weakness, if any, will be guided along the forward curve.

In April, FPI’S sold Rs 2680 Cr of Equities and sold Rs 3508 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 645.58 bn, as on March 29 th.

RBI maintained status quo on repo rates. Repo is at 6.5%. GDP is expected to be 7% in FY25 and inflation is expected to average 4.5% in FY 25. March GST collections climbed 11.6% to 1.78 lac Cr.

IIP and CPI data are notable data releases for upcoming week.

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: Global yields surged on strong manufacturing data. US ISM and UK PMI entered into expansion mode. Crude prices also climbed higher on the back of strong economic data. Better than expected economic data could delay rate cuts.

US 10 Year yield climbed to 4.4% after stronger than expected US employment data. US non-farm payroll employment grew 303k in March, well above expectation of 205k. That’s also much higher than the average monthly gains of 231k over the prior 12 months. Unemployment rate ticked down from 3.9% to 3.8%, below expectation of 3.9%. Participation rate rose from 62.5% to 62.7%.Average hourly earnings rose 0.3% mom, matched expectations. Over the past 12 months, average hourly earnings have increased by 4.1 yoy.

Higher inflation, strong jobs data and uptick in manufacturing has pushed back rate cut expectations. Probability of June cut has reduced and overall rate cuts for this year has been scaled down to 60 bps from earlier 150 bps.

EU March CPI eased to 2.4% y/y, down from 2.6% in February and below of the market estimate of 2.6%.

ECB’s March meeting accounts unveiled a unified stance among Governing Council members against discussing rate cuts at that time, citing it as “premature.” However, the narrative within the ECB is evolving, with increasing acknowledgment that “the case for considering rate cuts was strengthening,” pointing towards a strategic shift contingent on forthcoming economic data.

Focus is now on US CPI and PPI data.

Currency technical levels: USDINR: 83.20 (Supports), 83.70/84.10 (resistance),

EURINR:90.75/91.20(Resistance),89.50/88(Support),

GBPINR: Supports: 104( supports), Resistance:106.75/107.80(Resistance).

JPYINR: Resistance:55.30/56.50, 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 above 90.50. GBP receivables can be covered at 106+.

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