Currency Market 26-Dec: Unwind of RBI's Currency Future Intervention

Crude oil prices surged to fresh 3 month high levels of 67.40 amid easing trade war worries. It is noteworthy that OPEC and Saudi Arabia have agreed to cut daily oil production by total 2.1 billion bpd to revive oil prices. Currently, rupee market is not reacting much to a near 10%, in last four weeks, surge in oil prices. Technically, Brent crude has multiple resistance b/w 68-70 region. One should remain watchful of these levels as a close above 70 level might lead to weakness in rupee. Major currencies will remain closed for Christmas celebration.  

On domestic front, RBI has been actively intervening in future markets instead of OTC owing to huge liquidity surplus and spike in forward premium. When RBI buys in future markets, banks momentarily get an arbitrage opportunity by selling in future in buying in OTC. On expiry date (27-Dec) the future position will get net settled and Banks will need to unwind their OTC position. This should create a significant supply of USD for fix related selling. Thus, it might yield in some appreciation of rupee in short term. USDINR pair opened the session at flat note at 71.27 against previous close of 71.28. USDINR pair has first resistance at 71.30-35 levels and second resistance at 71.48-52 levels. USDINR pair has first support at 71.09-71.12 levels and second support at 70.97-71.02 levels. Range for day seen as 71.07-71.35