FX – WEEKLY UPDATE :
FX Weekly Currency Score Week 27
Weekly SYNOPSIS: 28/06/2024
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|
Currency Pairs |
WEEK CLOSE |
PRIOR WEEK CLOSE |
% change |
|
USD/INR |
83.38 |
83.56 |
-0.21 |
|
EUR/INR |
89.25 |
89.54 |
-0.32 |
|
GBP/INR |
105.46 |
105.81 |
-0.33 |
|
JPY/INR |
51.86 |
52.58 |
-1.36 |
Brent Crude closed at USD 85 VS previous month close of USD 85.50. Gold closed at USD 2326. Nifty closed at 24010 vs prior week close of 23501. 10 Year G-SEC Yield is now at 6.99%.
Major developments: USDINR traded in the 83.36-83.62 range last week, and Rupee gained 18 ps against USD w/w. In June, USDINR traded in the 82.95-83.68 range in June and closed with 5 ps gain as against May close of 83.43. EUR declined 0.32% w/w and GBP declined 0.33 w/w against Rupee.
Indian benchmark Equity climbed 2.12% w/w. 10 Year G-SEC Yield closed at 6.97%. 1-year fwd premia is at 1.63% p.a.
FX reserves stood at USD 653.71 bn, as on June 21 st. Reserves climbed by US D 816 mn w/w.
In June , FPI’S have bought Rs 24386 Cr of Equities and bought Rs 15616 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.
Rupee gained as JP Morgan started its initiation of Indian bonds in its index. This could attract USD 25 bn inflows over 1 year period. It has the potential to stabilize FX movement, lower borrowing costs by pushing yields lower. Bank funds could be released for lending purposes which could spur growth. Indian Equities continued its stellar run as President outlined the economic approach of the new Govt. Govt is expected to announce major social and economic growth boosting measures in its budget on July 22 nd.
Core sector climbed 6.2% in April after growing at 6% in March.
Focus is now on US rate path, and Union budget to be presented in July.
RBI has till now controlled USDINR movement in a very tight range. It has absorbed FX inflows and stemmed Rupee gains in the past. With USD stagnating against majors, it is difficult to build a bearish narrative for Rupee. USDINR could trade in the broad 82.95-83.70 range in coming period.
Hedging advise: Imports be hedged on decline to 83.30. Exports be hedged in the 83.60+ range.
Global developments: US data was light last week and incoming data suggests moderate growth with softening inflation. Most Fed members still feel that there is only modest progress in inflation despite moderation in growth.
US PCE price index was flat mom, matched expectations. PCE core price index (excluding food and energy) rose 0.1% mom. Both matched expectations. From the same month one year ago, headline PCE price index slowed from 2.7% yoy to 2.6% yoy. PCE core price index slowed from 2.8% yoy to 2.6% yoy. Both matched expectations.
Fed member elaborated on the unique challenges facing the US economy, emphasizing that monetary policy operates with “long and variable lags.” He suggested that these lags might be longer than expected due to factors such as labor hoarding, excess savings, delayed exposure to interest rate hikes, and newfound pricing power among businesses. Furthermore, he raised the possibility that the Fed’s rate hikes might not be constraining the economy as much as anticipated.
ECB Governing Council member noted that the current macroeconomic conditions support “normalization of the monetary stance.” He added that ECB initiated this process recently and, under the “baseline scenario,” intends to continue it “gradually and smoothly.” ECB Governing Council member Olli Rehn indicated that market data suggests the likelihood of two additional rate cuts, bringing the rate to 3.25% by the end of the year. He also noted that the terminal rate for this easing cycle is expected to fall between 2.25% and 2.50%.
Focus shifts to US jobs data and Fed Chairman’s speech at ECB policy symposium.
Currency technical levels: USDINR: 83.32 (Supports), 83.70 (resistance),
EURINR:89.80/90.25(Resistance)
GBPINR: Supports: 105/103.90( supports), Resistance:106.50/107(
JPYINR: Resistance:52.70, Supports: 51.40 (support).
Hedging advise: USDINR imports be hedged on decline to 83.30. EUR nearby receivables be covered in the 90-90.50 zone. GBP receivables can be covered at 106.50+.
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