FX – WEEKLY UPDATE :
FX Weekly Currency Score Week 30
Weekly SYNOPSIS: 19/07/2024
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|
Currency Pairs |
WEEK CLOSE |
PRIOR WEEK CLOSE |
% change |
|
USD/INR |
83.67 |
83.52 |
0.18 |
|
EUR/INR |
91.06 |
90.77 |
0.32 |
|
GBP/INR |
108.16 |
107.83 |
0.31 |
|
JPY/INR |
53.01 |
52.49 |
0.97 |
Brent Crude closed at USD 82.60 VS previous month close of USD 85. Gold closed at USD 2418. Nifty closed at 24530 vs prior week close of 24502. 10 Year G-SEC Yield is now at 6.97%.
Major developments: USDINR traded in the 83.53-83.68 range last week, and Rupee declined 15 ps against USD w/w. EUR climbed 0.32% w/w and GBP climbed 0.31 w/w against Rupee.
Indian benchmark Equity climbed 0.11% w/w. 10 Year G-SEC Yield closed at 6.97%. 1-year fwd premia is at 1.74% p.a.
FX reserves stood at USD 666 bn, as on July 12 th. Reserves climbed by US D 9 bn w/w.
In July , FPI’S have bought Rs 29218 Cr of Equities and bought Rs 11365 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 climbed steeply by USD 9 bn w/w in tandem with increase in FPR flows. FPI flows increased by Rs 20000 Cr last week. RBI seems to be absorbing inflows and is guiding Rupee down in a controlled and mild manner.
Indian trade deficit widened to USD 20.98 bn in June. Exports climbed 2.6% y/y to USD 35.2 bn and imports rose 5% to USD 56.18 bn. In March quarter, current account was in surplus at USD 5.7 bn, 0.6% of GDP. In Q1, export of Goods and services totalled USD 200 bn.
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 on July 22 nd.
Hedging advise: Imports be hedged on decline to 83.45. Exports be hedged in the 83.65+ range.
Global developments: Trade war fears, increasing optimism over Global rate cuts, Global IT outage and nomination of Trump as Republican candidate for US Presidential election were the highlights of last week developments.
There are reports that US in considering additional sanctions on Chipmakers dealing with China dampened market sentiments despite Fed Chairman’s dovish comments. US Equity markets sold off on fears of trade tensions.
US rate cut in Sept looks inevitable as inflation trends down and employment is back to equilibrium levels. Economic data have also turned soft. Retail sales was flat m/m in June and consumer spending is at an average level.
Fed Chairman Powell said that while “it’s been appropriate to focus mainly on inflation” for a long time, the cooling in the labor market now also warrants the Fed to watch out for an unexpected weakening in the labor market that may also provide “a reason for reaction by us.”
IMF chief economist stated that Fed can afford to “wait a little bit” before lowering interest rates. He expects one Fed rate cut this year but refrained from specifying the timing.
ECB maintained status quo and accompanying statement highlighted that domestic price pressures remain high, services inflation is elevated, and headline inflation is likely to stay above target well into next year. This outlook will keep ECB cautious regarding any further policy easing. There seems to be no rush into another rate cut. The next decision is heavily dependent on new economic projections available by the September meeting.
Eurozone CPI was finalized at 2.5% yoy in June, down from May’s 2.6% yoy. CPI core (ex-energy, food, alcohol & tobacco) was finalized at 2.9% yoy, unchanged from prior month’s reading.
ECB members said that market expectations of two rate cuts this year seems reasonable.
Pound surged past 1.30 as UK inflation data has faded BOE rate cut in Aug.
US GDP data and Core PCE data are important data releases for the week. EU, UK PMI data will also be watched.
Currency technical levels: USDINR: 83.56/83.32 (Supports), 83.70 (resistance),
EURINR:91.50/92.25(Resistance)
GBPINR: Supports: 107.40/106.70( 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 83.45. EUR nearby payables be covered in the 90 zone. GBP receivables can be covered at 109+.
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