USDINR Daily Update - 29-Nov

Major currency pairs witnessed subdued action on account of ‘Thanks Giving Day’. EUR/USD pair failed to break 1.10 handle despite weak German CPI reading. German CPI slipped into negative territory to -0.8% M-o-M. USD/CNH pair spiked above 7.03 handle amid expected retaliation by China on Hong Kong law.

On domestic front, USD/INR opened the session on a flat note at 71.61. Partially convertible rupee will take further cues from Q2 GDP numbers, schedule to release later during the day. India’s Q2 GDP growth is expected to slow further to 4.7% against Q1 GDP growth of 5.0%. For the day, USD/INR pair has support at 71.44-48 levels and first resistance at 71.72-75 levels and second resistance 71.88-92 levels. Range for day 71.50-71.90.

USDINR Daily Update - 28-Nov

Overnight, Trump has signed Hong Kong bill to support pro-democracy activists. This should complicate trade negotiations b/w US and China. On economic front, US GDP grew with a robust 2.1% in Q2, fading any concerns of recession in US economy. It is noteworthy that US FED had delivered a series of rate cuts on expectation of slowing economic growth. GBP/USD pair spiked above 1.29 handle amid expectation of a Tory majority.

USDINR pair opened session on a flat note at 71.32 against previous close of 71.35. Further gains in partially convertible rupee may be kept, amid US China trade concerns and robust US economic growth. USD/INR pair has immediate support at 71.18-21 levels and USD/INR pair first resistance at 71.42-45 levels and second resistance at 71.68-70 levels. Range for the day 71.20-71.65.

USDINR Daily Update - 27-Nov

Overnight, Trump’s positive comments on US China trade deal failed to have significant market reaction. USD/CNH pair rebounded above 7.02 handle and USD/JPY pair spiked above 109.00 handle. On the other hand, US dollar index eased slightly as consumer confidence missed estimates. GBP/USD pair fell nearly 50 pips as Kantar poll showed Conservative lead over Labour narrowed.

USD/INR pair opened the session on a flat note at 71.44 against previous close of 71.49. Yesterday, partially convertible rupee had rallied nearly 20 paisa amid possible inflow related to MSCI rejig. USD/INR pair has first support at 71.38-71.40 levels and second support near 71.20. USD/INR pair has resistance near 71.70. Range for the day 71.25-71.70.

USDINR Daily Update - 22-Nov

Financial markets continued to react to US, China trade deal updates. US 10 year bond yields spiked nearly 7 bps to 1.77% after the Chinese commerce ministry said Beijing will strive to reach an initial bilateral trade agreement. Consequently, USD/CNH pair corrected to 7.0320 from 7.0530 and USD/JPY rebounded above 108.50. EUR/USD pair corrected nearly 50 pips after broad recovery in US dollar index. Going forward, EUR/USD pair will take further cues from Euro-Zone PMI numbers and ECB president Lagarde’s comments. A dovish tone should lead to further correction in EUR/USD pair.

On domestic front, 10 year bond yield spiked above 6.50% on global cues. Today, RBI to conduct INR 160 Bn bond auction in different long tenure maturities, it might put further pressure on bond yields. USD/INR pair opened the session on a flat note at 71.75. USD/INR pair has support near 71.60-65 levels and resistance at 71.98-72.05 levels. Range for the day 71.60-71.98.

USDINR Daily Update - 21-Nov

Globally, US FED meeting minutes suggested that FED members see little need for further easing. Current monetary policy stance is appropriate for moderate risk, strong labor markets and 2% inflation outlook. On the other hand, US house passed Hong Kong rights bills, which might complicate the trade talks between US and China. Further reports suggested that US, China phase one deal could slide into next year. Consequently, US 10 year bond yield fell further below 1.73%, USD/CNH spiked above 7.04 handle and USD/JPY slipped below 108.50.

On the domestic front, Government approved strategic disinvestment in BPCL and other four PSUs. It is noteworthy that Government had set INR 1.05 trillion disinvestment target for the current fiscal. Domestic yield eased further below 6.47% tracking global yield movements.

USD/INR pair opened the session on a flat note at 71.82 against previous close of 71.81. The partially convertible rupee is likely to trade with weakening bias amid spike in USD/CNH pair. USD/INR pair has support near 71.65-71.70 levels and first resistance at 71.98-72.05 levels and second resistance at 72.25. Range for the day 71.67-72.05.

USDINR Daily Update - 20-Nov

Globally, equity markets slipped in the red after Trump threatened to raise tariffs if China does not enter into a deal. Consequently, USD/JPY pair slipped below 108.50 level, USD/CNH pair spiked above 7.0300 level. On the other hand, GBP/USD pair slipped more than 50 pips to 1.2910 after inconclusive debate b/w Boris Johnson and Jeremy Corbyn. Going forward, market will take further cues from US FED meeting minutes, schedule to release later during the day.

On the domestic front, finance ministry reiterated the confidence to retain fiscal deficit target of 3.3%. This lead to a rally in bond markets with 10 year bond yields slipped nearly 5 bps to 6.47%. Additionally, gains in bond markets were supported by movement in US 10 year bond yields, which slipped below 1.75%.  

The USD/INR pair opened the session at 71.83 against previous close of 71.71. Going forward, USDINR pair has immediate support near 71.65-70 levels and next support 71.45-50 levels, resistance at 71.92-97 levels. Range for the day 71.50-71.97 levels.

USDINR Daily Update - 18-Nov

Globally, GBP/USD pair continued to gain to 1.2930 levels as Conservative MPs extended the support to Boris Johnson’s deal. GBP/USD pair is likely to trade on cues from UK’s political developments. The US dollar index slipped further to 97.90 levels amid the positive comments by Chinese media on US-China trade deal.

On domestic front, India’s trade deficit shrink to USD $11.01 Bn in October against USD $18.0 a year ago. The narrowing trade deficit may not necessarily a good news as a sharp decline in import indicates a slowdown in domestic economy. India’s import fell sharply by 16.3% and exports contracted by 1.1% Y-o-Y basis.

The USD/INR pair has opened the session on a weaker note at 71.68 levels against previous close of 71.78 levels. The weak-opening in the pair can be attributed to weaker dollar and easing US-China trade deal concerns. Going forward, USDINR pair has immediate support at 71.50-55 levels, if broken than next support at 71.20-25 levels, and immediate resistance at 71.75-80 levels. Range for the day – 71.35-71.80.

USDINR Daily Update - 15-Nov

Globally, USD/JPY, which had slipped below 108.30 levels, has rebounded to 108.57 as Larry Kuldow, White house economic advisor, suggested that US-China are getting close to a phase 1 deal. Broadly, risk on sentiments remained in control as S&P 500 index closed at an all-time high level of 3096.63.  The EUR/USD rebounded above 1.10 handle as German economy grew at 0.1% against broadly expected contraction in Q2.

On Domestic front, USDINR pair opened session 71.80 levels against previous close of 71.97 levels. The weaker opening the pair can be attributed to softness in US dollar index. Going forward, Supreme Court of India is expected to give verdict Essar insolvency case, later during the day.  A positive decision should lead to INR appreciation. Overall, USDINR pair has immediate support at 71.70-75 levels, if broken next support at 71.50-55 and immediate resistance at 71.92-97 levels. Range for the day – 71.45-71.97.

USDINR Daily Update - 14-Nov

Globally, US 10 year bond yield eased nearly 7 bps after mixed comments by Powell. US FED governor maintained that current monetary policy remained appropriate given moderate growth expectations, tightening labour markets and inflation expectations of below 2%. Future funds rates currently pricing less than 45% chance of rate cut in next one year. On other hand, safe haven currencies Yen and CHF traded with biddish bias amid lack of clarity on US-China trade deal.

On domestic front, India’s headline CPI inflation spiked to 16-month high of 4.62% lead by elevated food inflation, with vegetable inflation at 26% (MoM). More importantly, Core inflation remained under-check at 3.3%, hence should not hamper RBI’s December rate cut expectations.

USDINR pair opened the session on a flat note at 72.07 levels against previous close of 72.06. Range for the day for USDINR 71.90-72.40 levels.

USDINR Daily Update - 13-Nov

The USD/INR pair opened the session on stronger note near 71.77 levels against previous close of 71.45 levels. The weaker opening in rupee can be attributed to the spike in USD/CNH levels on Trump rhetoric and broad strength in US dollar index, which remained biddish above 98.00 handle. In UK Brexit party extended support to conservatives as it will not fight election on 317 seats, which were won by Conservative in 2017.

Going forward, USDINR pair will take further cues from Powell’s speech, later during the day, as market expects more clarity on monetary policy. On domestic front, high frequency data remain sluggish as Industrial production contracted by 4.3%. Range for the day for USDINR 71.45-71.90 levels.

Long Dollar on Fed Pause

After cutting interest rate for third straight meeting, US FED has tried to prepare market for a long pause. US Governor underlined strong jobs markets and its positive impacts on bottom of pyramid, who got better job opportunities due to accommodative policies. US unemployment rate remained close to multi-year low at 3.6% and wage growth remain low at 0.2%.

Economic activity has shown signs on weakness as retail sales decline in Sep and ISM manufacturing PMI remained below 50 for third consecutive month. This seems to be a secondary reason for FED rate cuts while Trump remains the prime driver. During speech, FED governor acknowledged this slow-down while expecting a moderate growth in near future. US inflation continued to remain below 2% levels and FED surveys shows that inflation expectations are settling well below its 2% target.

QE or Not QE –

As repo market witnessed sudden crunch of US dollar and overnight rates spiked close to 8% levels. US FED restarted its bond buying programme but limited to short term bonds. FED’s decision to buy T-bills, till q2 next year, should led to increase in FED balance-sheet size. This, FED believes is technical thing and should not have any implication on long term yields and monetary policy. Rather it is tool to smooth en the current monetary policy.

As US FED is already expecting a weak inflation and moderate growth in coming quarters and it believe current monetary policy stance is accommodative in these scenario. Thus this blog expects a decent pause from FED.

          US Dollar Index – Weekly Chart

Technically, US dollar index has taken support nearly weekly channel low of 97.10 levels. In coming-weeks US dollar index can test previous high of 98.80-99.20 levels with stop-loss of 97.00.