Tuesday 30 June 2020

Currency Market Updates: 30th June

Globally, German CPI inflation printed on 0.6% on m-o-m basis against previous reading of -0.1%. EUR/USD pair is trading flat near 1.1240 levels. US equity markets recovered sharply as Dow Jones rebounded to 25.595 levels, nearly 2.3% higher than Friday’s close. US has suspended special treatment for Hong Kong. On other hand, Chinese manufacturing and non-manufacturing PMI released better than expected at 50.9 and 54.4. It is noteworthy that other major economies are struggling with PMI data below 50.

On domestic front, Reserve Bank of India announced another round of operation twist, where in RBI will simultaneously buy (Long term) and sell (Short Term) government security worth INR 10,000 Cr. RBI will buy govt bonds of long maturities (2027,2029,2031,2033) and sell govt bonds of short maturities (2020 & 2021). Operation twist is intended to flatten the yield curve. Today (30th June) RBI will revalue its FX reserve and balance sheet as per year ending process. Thus, today’s USDINR price closing and RBI Fixing rate hold a lot of significance. Interestingly, there has been a theory in markets that RBI has been proactively intervening in FX markets to keep rupee appreciation in check. Under the new Economic capital framework (ECF) higher value to USDINR may allow RBI to announce higher dividends. USDINR pair has immediate support near 75.35-40 levels and immediate resistance at 75.80-85 levels.

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