Currency Weekly Report– Detailed Report

Monday, December 08, 2014

Major Global Currencies % change for the week

3.00%

2.00%

1.00%

0.00%

-1.00%

-2.00%

-3.00%

-4.00%

Dollar

Index

USDINR

EURUSD

EURINR

GBPUSD

GBPINR

USDJPY

JYPINR

EURGBP

-1.11%

-1.33%

-0.42%

-0.88%

-2.75%

-1.04%

0.70%

1.31%

2.36%

Rupee traded higher last week after RBI kept the

key rates unchanged. India’s foreign exchange

reserves grew by $1.43bn to $316.31bn for the week

ended Nov 28 v/s $314.87bn in the week before.

FIIs have bought debt worth $1.2bn so far in

December, while equity inflows stand at $650.8mn.

In the week ahead all eyes will be on India’s CPI

numbers which is due on Friday.

Dollar index remained close to six-year highs against

a basket of other major currencies last week, after

data showed that the US economy added more jobs

than expected last month lent broad support to the

dollar. US economy added 321,000 jobs in

November, exceeding expectations for jobs growth

of 225,000, v/s 243,000 previously.

Growth in China's manufacturing sector slowed in

November, suggesting that it is still losing

momentum and adding pressure on authorities to

ramp up stimulus measures after unexpectedly

cutting interest rates last month. The official PMI

eased to an eight-month low of 50.3 last month, still

indicating a modest expansion in activity but below

forecasts for 50.6 and October's 50.8.

Rupee v/s Forex Reserves Weekly

320

318

316

314

312

310

308

306

62.5

61.5

60.5

59.5

Source: Reuters

India Forex Reserves

INR (RHS)

US Jobs Market

350,000

300,000

250,000

200,000

150,000

100,000

50,000

Source: Reuters

Nonfarm Payrolls

Unemployment Rate (RHS)

Please refer to the disclaimer at the end of the report.

USDINR:

Rupee traded higher against the dollar last week after

RBI kept the policy rate unchanged for the fifth time

in a row, but hinted at softening of stance “early next

year” if inflation continues to abate and there is an

improvement in fiscal health. On the inflation

trajectory, Rajan said he expects it to ease further

and average at the 6%. However, also warn of

uncertainty continuing over oil pricing, saying that

any geo-political tension will send the prices up again.

The RBI’s next policy review is in early February,

building expectation that the central bank would

either cut interest rates then or wait until April.

Technically,

As shown on the daily chart, USDINR

continues to trade in a very small range broadly

moving between 62.00-62.30 since the past two

weeks. Strong supports on the downside seen at

62.05/61.80 whereas 62.32/62.45 could act as

resistances with strong resistance seen near 62.60-

62.70 range. Only sustained breach above 62.70

would be further positionally bullish while breach

below trend line support near 61.80 could indicate

short-term weakness. Even though the trend is still

up, one can trade within the range i.e. buying on dips

near supports as well as selling near resistances.

CPI V/S Repo Rate

Source: Reuters

Repo Rates

CPI

EURUSD:

Euro dropped to two-year lows against the dollar last

week after ECB President Mario Draghi indicated that

it would not embark on quantitative easing for now,

saying the bank would reassess its stimulus program

in the Q1of 2015. He said the bank could potentially

change the size, scale and composition of its existing

stimulus programs and added that governing council

remained unanimous that it would take further

measures if needed. ECB also substantially revised

down its forecasts for growth and inflation and

warned that the latest forecasts do not take into

account the recent steep drop in oil prices.

Technically,

As shown on the daily chart, EURINR

has been declining since the past three months

forming lower higher and lower lows within the

downward-sloping channel C-C1. The pair faces stiff

resistance from trend line C near 77.60 below which

the short-term trend remains bearish. Immediate

support is seen at 76.45. Sustained breach of this level

could lead to test of lower supports at 75.90 followed

by strong support at trend line C1 near 75 level.

Selling on rallies is still advisable.

CPI (YoY)

1.2

0.8

0.6

0.4

0.2

0.6

0.5

0.4

0.3

0.2

0.1

Source: Reuters

CPI (YoY)

ECB Rate Decision (RHS)

Please refer to the disclaimer at the end of the report.

GBPUSD:

Pound traded lower against the dollar last week, after

the BOE's monetary policy committee left UK interest

rates on hold at their current record low of 0.5% and

maintained the size of its asset purchase program at

£375bn. Meanwhile, British manufacturing activity

unexpectedly picked up a little speed in November as

domestic demand offset falling exports due to sluggish

orders from the euro zone and emerging markets, a

survey showed on Monday. PMI rose to 53.5 from

53.3 in October, reaching its highest level in four

months. Also services sector expanded faster than

expected last month, suggesting the economy may be

slowing less than previously thought following a year

of robust growth. The services PMI rose to 58.6 in

November after falling sharply to 56.2 in October,

amid reports of firm demand and increased new

business.

Technically,

As shown on the daily chart of GBPINR,

the pair has been steadily declining within a band

since the past 16 months after peaking near 107.70

level. The pair is nearing its support at trend line C

near 96.50 level. The short-term trend still looks weak

below immediate resistance at 98.10 level. However,

reversal from key support at 96.50 could provide a

buying opportunity on the back of short-covering.

UK's Manufacturing PMI

Source: Reuters

Industrial Production

-2

-4

USDJPY:

Yen hit a fresh seven-year low against the dollar last

week after Japanese media outlets reported that Prime

Minister Shinzo Abe's coalition government could

retain its majority in the lower house of parliament in

elections due to be held on December 14. Abe

dissolved parliament last month, clearing the way for

elections to seek a fresh mandate for his economic

policies, which call for a weaker yen. The decision

came after Japan’s economy unexpectedly fell into

recession in the Q3.

Technically,

As shown on the daily chart of

JPYINR, the pair continues to form lower highs and

lower lows continuing its short term weakness.

Resistance for the pair is pegged at 52.05 – 52.30

and selling on rise is advisable targeting 51.20 –

50.90. Our bias could reverse only if it breaches

52.30 on a sustainable basis. Next major resistance

is at trend line A near 52.95 level.

Source: Reuters

Japan

China (RHS)

Please refer to the disclaimer at the end of the report.

Weekly Economic Calendar

Time

5:20 AM

7:30 AM

12:30 PM

1:15 PM

3:00 PM

5:20 AM

7:00 AM

1:15 PM

3:00 PM

5:20 AM

12:30 PM

1:15 PM

2:30 PM

7:00 PM

10:00 AM

11:00 AM

12:30 PM

Cur.

JPY

CNY

EUR

GBP

JPY

CNY

EUR

GBP

JPY

EUR

USD

JPY

CNY

EUR

Imp.

Mild

High

Mild

Event

Forecast

0.46T

0.395T

-0.50%

-0.10%

7.90%

3.50%

43.15B

-1.60%

-1.50%

19.2B

0.41T

0.963T

-1.60%

-0.40%

11.60%

4.60%

45.41B

5.50%

5.40%

18.5B

36.8B

41.5B

-4.7B

1.50%

0.60%

2.90%

0.40%

-0.80%

2.90%

0.00%

1.60%

0.00%

-9.82B

2.90%

7.30%

0.00%

0.60%

0.00%

0.30%

0.20%

7.70%

-0.70%

Monday, December 8, 2014

Adjusted Current Account

Current Account n.s.a. (Oct)

GDP (YoY) (Q3)

GDP (QoQ) (Q3)

Exports (YoY) (Nov)

Imports (YoY) (Nov)

Trade Balance (Nov)

Tuesday, December 9, 2014

German Exports (MoM) (Oct)

German Imports (MoM) (Oct)

German Trade Balance (Oct)

French Exports (Oct)

French Imports (Oct)

French Trade Balance (Oct)

Industrial Production (YoY) (Oct)

Industrial Production (MoM) (Oct)

Manufacturing Production (YoY) (Oct)

Manufacturing Production (MoM) (Oct)

-4.5B

1.80%

0.20%

3.20%

0.20%

-0.20%

2.60%

0.10%

1.60%

0.20%

-9.53B

-1.90%

-0.10%

0.00%

0.60%

0.20%

0.10%

Wednesday, December 10, 2014

CGPI (MoM) (Nov)

CGPI (YoY) (Nov)

CPI (MoM) (Nov)

CPI (YoY) (Nov)

French Industrial Production (MoM) (Oct)

Trade Balance (Oct)

Thursday, December 11, 2014

Core Machinery Orders (MoM) (Oct)

Core Machinery Orders (YoY) (Oct)

German CPI (MoM) (Nov)

German CPI (YoY) (Nov)

French CPI (MoM) (Nov)

ECB Monthly Report

Core Retail Sales (MoM) (Nov)

Friday, December 12, 2014

Industrial Production (MoM) (Oct)

Industrial Production (YoY) (Nov)

German WPI (YoY) (Nov)

7.50%

Please refer to the disclaimer at the end of the report.

12:30 PM

3:30 PM

5:00 PM

5:30 PM

7:00 PM

EUR

INR

USD

Mild

High

Mild

German WPI (MoM) (Nov)

Industrial Production (YoY) (Oct)

FX Reserves, USD

CPI (YoY) (Nov)

Cumulative Industrial Production (Oct)

Industrial Production (YoY) (Oct)

Manufacturing Output (MoM) (Oct)

Core PPI (YoY) (Nov)

PPI (MoM) (Nov)

0.50%

5.81%

0.50%

1.80%

-0.10%

-0.60%

0.60%

316.31B

5.52%

2.80%

2.50%

1.80%

0.20%

For any details contact:

Currency Advisory Desk - +91 22 3958 3600

currencyresearch@motilaloswal.com

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