Currency Market 13-Feb: CPI Surges to 7.59%

Globally, China’s Hubei reported 14,840 new cases and additional 242 deaths. As per officials the sharp increase in new cases is due to inclusion of “Clinically diagnosed” patients. Interestingly, market has given muted reaction as USDJPY slipped 20 pips to 109.88 and USDCNH spiked to 6.9850 levels. On other hand, Powell painted an upbeat picture of US economy, with strong labor market and consumer demand. Although, FED governor acknowledged possible risk of Corona Virus but overall impact is still uncertain. US dollar index surged to fresh five year high to 99 handle. The US dollar will take further cues from CPI data, due to release later during the day.

On domestic front, India CPI inflation continues to remain elevated with a reading of 7.59% in January. Food inflation, which is a major contributor to the headline, remained in double digit at 13.6%. A more worrying sign is pickup in core inflation, which spiked to 4.1% tracking spike in headline. Interestingly, domestic 10 year bond yields eased to 6.45% from intraday high of 6.4880%. It is noteworthy that RBI’s MPC expects CPI inflation to ease going forward with forecast of 3.2% in Q3 FY 20-21. India’s IIP contracted by 0.3% in December against growth of 1.3% in November. On currency front, USDINR pair is trading at 71.46-47 with a biddish bias tracking broad US dollar strength, weaker yuan and weaker domestic economic data. The gains in USDINR pair were further supported by heavy buying by PSBs. The USDINR pair has immediate resistance at 71.60-65 levels and support at 71.20 levels. Range for day seen as 71.35-71.60.