FX – WEEKLY UPDATE :
FX Weekly Currency Score Week 29
Weekly SYNOPSIS: 12/07/2024
Currency Map:
|
Currency Pairs |
WEEK CLOSE |
PRIOR WEEK CLOSE |
% change |
|
USD/INR |
83.52 |
83.47 |
0.05 |
|
EUR/INR |
90.77 |
90.37 |
0.44 |
|
GBP/INR |
107.83 |
106.65 |
1.10 |
|
JPY/INR |
52.49 |
51.97 |
1 |
Brent Crude closed at USD 85 VS previous month close of USD 87. Gold closed at USD 2411. Nifty closed at 24502 vs prior week close of 24323. 10 Year G-SEC Yield is now at 6.98%.
Major developments: USDINR traded in the 83.44-83.59 range last week, and Rupee declined 5 ps against USD w/w. EUR climbed 0.44% w/w and GBP climbed 1.10 w/w against Rupee.
Indian benchmark Equity climbed 0.73% w/w. 10 Year G-SEC Yield closed at 6.98%. 1-year fwd premia is at 1.66% p.a.
FX reserves stood at USD 657 bn, as on July 5 th. Reserves climbed by US D 5 bn w/w.
In July , FPI’S have bought Rs 13799 Cr of Equities and bought Rs 6277 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.
Indian CPI climbed to 4 month high of 5.08%. Food inflation climbed to 9.55% as against 8.58% in May. Vegetable prices climbed 29.3% and pulses inflation accelerated 16.1%. IIP climbed 5.9% in May. Mfrg climbed 4.6%, mining grew by 6.6% and power sector climbed 13.7%. Consumer durables grew by 12.3% and Capital sector climbed 2.5%.
Indian Equity markets continued to rally. TCS beat expectations. Focus will be on quarterly results and Union budget. FX reserves climbed steeply as RBI absorbed FPI inflows.
Rupee movement remains stuck in narrow range. 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.
Focus is now on US rate path, and Union budget to be presented in July.
Hedging advise: Imports be hedged on decline to 83.30. Exports be hedged in the 83.60+ range.
Global developments: Highlight of last week was the softer than expected US CPI data. This could aid Fed to cut rates in Sept and possibly cut again in Dec. Probability of Sept rate cut has soared to 80%. Lower than expected consumer sentiment and softer inflation expectations were enough to maintain selling pressure on the US Dollar heading into the weekend.
In Currency markets, yen was a major gainer due to possible intervention by BOJ. Gold also rallied. US Equity markets gyrated after US CPI data. Tech stocks fell steeply on Thursday.
US Consumer prices declined by 0.1%, led lower by a drop in energy prices and a modest increase in food prices. Excluding food and energy, the core CPI increased by just 0.1% (0.06% unrounded), which was the smallest increase since January 2021.Over the past three months, the core CPI has increased at a 2.1% annualized pace. This marks the smallest three-month change in core prices since March 2021.
Fed Chairman in his testimony to US Congress flagged cooling labor market as an indicator for rate cuts. Reducing policy restraint too late or too little could unduly weaken economic activity and employment,” Powell said, after noting that labor market indicators “have returned to about where they stood on the eve of the pandemic”
The Fed’s acknowledgement that risks are more two-sided suggests that the central bank’s outlook on the balance of risks is shifting … “in ways that would plausibly underpin a cut in September rate cut,”. Declining inflation and rise in unemployment rate should strengthen Fed’s hand to cut rates in Sept.
ECB Vice President Luis de Guindos said last week that he expected a “bumpy road” for inflation in the coming months and that there was no predetermined path for rate decisions.
UK GDP grew by 0.4% mom in May, surpassing expectations of 0.2% mom increase. The primary driver of this growth was a 0.3% mom rise in services output, which significantly contributed to the overall monthly GDP increase.
ECB meeting, US retail sales and Fed Chairman’s speech are important events for coming week.
Currency technical levels: USDINR: 83.32 (Supports), 83.70 (resistance),
EURINR:92.25(Resistance),89.
GBPINR: Supports: 106.70( supports), Resistance:109(Resistance).
JPYINR: Resistance:53.80/54.70/55.25, Supports: 51.50 (support).
Hedging advise: USDINR imports be hedged on decline to 83.30. EUR nearby payables be covered in the 90 zone. GBP receivables can be covered at 109+.
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