Monday, May 12, 2014
Major Global Currencies % change for the week
0.90%
0.80%
0.70%
0.60%
0.50%
0.40%
0.30%
0.20%
0.10%
0.00%
0.81%
0.84%
0.65%
0.49%
0.35%
0.09%
0.55%
0.32%
0.67%
Dollar
Index
USDINR
EURUSD
EURINR
GBPUSD
GBPINR
USDJPY
JYPINR
EURGBP
Rupee continued to trade in a narrow range for the
week as the market is now awaiting a major events
keeping participants shy from taking risky bets. The
rupee is expected to appreciate beyond 60 a dollar
this week, if the outcome of the Lok sabha election is
in line with the Street's expectations. The BJP -led
NDA is leading in opinion polls. If it wins, as expected,
INR could inch towards 58-59. Even if it goes below
this level, it may not sustain. But a decisive mandate
can put a strong cap of 61 per dollar.
Ukraine continuing to exert influence on prices while a
rebound in the U.S. dollar pushed prices lower on the
week. The ECB kept rates unchanged but expectations
of action in the next meeting pulled the euro sharply
lower from its high. On the other hand, Janet Yellen’s
dovish commentary prevented sharper declines in
gold. Economic data during the week was mixed but
overall expectations that the Fed will continue tapering
has kept the trend in precious metals lower. Next
week is pretty light on economic data but a spate of
data from Retail sales to inflation to housing are due.
Rupee Vs Domestic Forex Reserves
315
310
305
300
295
290
285
280
63
62
61
60
59
58
Source: Reuters
India Forex Reserves
USDINR
FII Flows weekly
30000
20000
10000
0
-10000
Source: Reuters
Please refer to the disclaimer at the end of the report.
 Motilal Oswal Financial Services
USDINR:
Rupee continued to trade in a narrow range for the
week as the market is now awaiting a major events
keeping participants shy from taking risky bets.
Government bond yields are seen falling as flows from
foreign institutional investors will pick up in debt
instruments. The yield on the 10-year bond may fall to
8.70% due to FII flows in debt. The large dollar
inflows are behind the rupee’s recovery. So large have
these inflows been that the RBI has had to mop up a
portion of the dollars to prevent a sharper rise in the
rupee’s external value. That would hurt export
competitiveness, badly needed today to keep the CAD
in check. Not so long ago, the RBI was doing the
reverse, selling dollars to support the falling rupee.
USDINR has strong support near Rs.59.95 while
strong resistance is at 60.55/61.20 level. As long as
below Rs.61.20 major trend remains down and selling
on rise is advisable. Fall below Rs.59.95 will confirm
the weakness for the target of 59.60/59.20 level. Only
rise above 60.55 would be the first trend reversal sign.
EURINR:
EURUSD cracked more than 200 bps from 1.40 to
1.3750 after ECB kept rates unchanged and President
Draghi pointed of a stimulus in June if growth had not
accelerated along with inflation. The dollar reacted to
strong data from the US and a promise from Fed Chief
Yellen that interest rates would remain low for a long
time forward. Next week will show preliminary GDP
reading out of the euro zone which will be around
0.4%. Domestic demand conditions have started to
improve, helped by lower inflation, higher confidence
and improving labour markets. The unemployment
report for March showed the jobless rate at 11.8% for
the last four months, down from a peak of 12%
through most of 2013.
EUR INR fell sharply last week and closed near
Rs.82.95 level. The pair has strong resistance on the
upside at Rs.83.45/84.15/84.65 while strong supports
are placed at Rs.82.25/81.90 level. As long as below
84.15, selling on rise is advisable.
Trade Balance
(Billion in USD)
0
-10
-20
-30
-40
-50
Source: Reuters
INDIA
US
CPI (YoY)
2
1.5
1
0.5
0
1
0.8
0.6
0.4
0.2
0
Source: Reuters
CPI (YoY)
ECB Rate Decision
Please refer to the disclaimer at the end of the report.
 Motilal Oswal Financial Services
GBPINR:
After a strong move during the start of the week
towards 1.70 GBPUSD ended the week with some
losses, as investors locked in profits on growing
expectations for a rate hike by the BoE before other
central banks. U.K trade deficit narrowed to £8.48
billion in March, from £8.75 billion in February, whose
figure was revised from a previously estimated deficit
of £9.09 billion. The data added to a recent string of
strong economic reports indicating that the recovery is
deepening, fuelling further expectations for a U.K. rate
hike in the early part of next year.
GBPINR has strong support near 100.70/100.50 while
strong resistance is at 102.40/102.80 level. Short term
trend looks weak and selling on rise is advisable for
the downside target of Rs.100.70/100.50. Only move
above 102.40/102.80 would be the trend reversal.
UK's Industrial Production
99
98
97
96
95
94
93
92
JPYINR:
USDJPY ended the week on a strong note above 101.5
after BoJ as they decline to add additional stimulus
coupled with strength in the USD. BoJ sees no need
for further action, and that will keep the prices
elevated for a longer period. Action may come rom
BoJ once it missed on its inflation estimates. Market
now awaits the CAD from Japan, which will keep the
JPY under check. The absence of BoJ measures
suggests JPY will remain at current levels longer than
previously expected, although in the medium term
many factors point towards a notably weaker yen.
JPYINR has strong support near Rs.58.85/58.65 level.
As long as this support zone is held on the downside,
buying on dips is advisable. Immediate target or
strong
resistance
on
the
upside
is
at
Rs.59.60/60.00/60.45 level.
Source: Reuters
Please refer to the disclaimer at the end of the report.
 Motilal Oswal Financial Services
Weekly Economic Data
Cur.
Event
IMP
Monday, May 12
INR
INR
USD
Indian Trade balance(tentative)
Indian Industrial production
Federal budget balance
High
High
Mild
Tuesday, May 13
CNY
USD
Chinese Industrial Production
Retail sales
High
Mild
Wednesday, May 14
JPY
INR
GBP
USD
Japan CGPI
India WPI
BOE Inflation report
PPI
Mild
High
High
High
Thursday, May 15
EUR
EUR
USD
USD
CPI
GDP
CPI
Initial jobless claims
High
High
High
High
Friday, May 16
USD
USD
USD
Housing starts
Building permits
Michigan consumer sentiment
Mild
Mild
Mild
Please refer to the disclaimer at the end of the report.
 Motilal Oswal Financial Services
For any details contact:
Currency Advisory Desk - +91 22 3958 3600
currencyresearch@motilaloswal.com
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