Currency Weekly. A W e e k l y C o m p r e h e n s i v e R e p o r t o n C u r r e n c y

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1 INR 2 August 2010 NSE Aug Sell at TP 46.31/46.12 SL MCX-SX Aug Sell at TP 46.31/46.12 SL INDICATORS LAST 1 week ago % Change LIBOR 1Mth LIBOR 3Mth MIBOR 1Mth MIBOR 3Mth U.S. 5Yr Bond Yield U.S. 10Yr Bond Yield India 5Yr Bond Yield India 10Yr Bond Yield Reference rate CBLO rate Call Rate ASIAN/INR LAST 1 week ago % Change Indian rupee Chinese Yuan Hongkong Dollar Indonesian Rupiah Myanmar Ringgit Philipinnes Peso Singapore Dollar S Korean Won Taiwan Dollar Thailand Baht Pair LAST 1 week ago % Change USDINR GBPINR JPYINR EURINR Particular (in USD MIO) LAST 1 week ago % Change Foreign Current Asset Special Drawing Rights Gold Reserves Total FOREX Reserves FUNDAMENTAL REVIEW: The Indian rupee moved quite volatile and settled at levels last week appreciating by 49 paisa or 1.14 percent. During the week, rupee touched month high of The volatility and appreciation in rupee attributed to dollar weakness versus other currencies, change in interest rate by RBI and selling dollar by the custodian banks. The rupee also pressurized by month-end dollar demand and volatility in the Dollar index. Moreover, domestic indices were volatile during the week. The BSE SENSEX settled at , down by 261 points W/W. Generally, rupee moves in tandem with domestic indices. But, in last couple of days the relationship has changed and it very less correlated with the indices. It generally drives by investor sentiment and dollar index movement. Other factors such as demand for domestic currency, capital inflow, global weakness and Euro strengthening against greenback affect the domestic currency. Moreover, the Dollar Index a gauge of greenback s movement against major global six currencies has been trading lower for last couple of days and it ended the week down by 1.1 percent. The fall in dollar against yen and euro helped rupee to pare some losses towards end of the wee. The near month on-shore and off-shore forward contract closed at and respectively. The one month offshore premium ran stronger than spot rate thereby suggesting a bullish near-term outlook.

2 TECHNICAL SNAPSHOT: The Indian rupee witnessed a downfall last week by reversing the penultimate week s trend. Initially, it made a high of levels thereafter it failed to breach the resistance at resulted to post a lower closing at levels. Closing of the previous week s candle renders sideways to lower movements. Market is trading in a band of levels for the past three weeks, which is likely to continue the same trend for this week. Moving average principle suggests market has the potential to remain higher since the rupee closed above the short term and medium term EMA. The momentum indicator RSI (14) weekly ended at 0.52 levels and turning negative. The support is at levels on breach of the same expected to test 1 st minor support at levels sustain above is likely to bounce back. Week ahead, the host of new data releases from the US include ISM Manufacturing, Personal Income, personal spending, factory orders, Initial Jobless claims, continuing claims, change in non- farm payrolls, change in private payroll and few more. As per the survey by economist, the overall data posting a mixed impact on US economy and global market but it more negative for US dollar. While in India, WPI on primary article, export- import data releases are likely to have little impact on rupee as the central bank increased the repo and reverse repo to tame the inflation effect. Investor need to watch on dollar index as it was volatile last week and dollar shed on account of euro and yen strengthened. The dollar index expected to remain volatile due to mixed economy data releases and market sentiment seems weaker against dollar. So there might be possibility that dollar might depreciate against other currencies. We expect rupee to trade sidelines with dollar index and it would be cues for investor. However, sustained capital inflow, expectation of domestic market gains and increase in interest rate by RBI (which may further increase interest rate differential benefit in rupee denominated assets) are the supporting factors. Overall, view holds on appreciating side against the dollar. Technically speaking, we expect rupee to trade sideways to lower. USDINR EUROINR GBPINR JPY (100) Futures MYR SGD INR SPOT MCX-SX Futures NSE Futures Month NDF Month FORWA NIFTY SENSEX

3 DOLLAR INDEX Dollar Index SPOT Sell at TP 80.98/80.66 SL TECHNICAL SNAPSHOT Dollar index resumed its downtrend by extending the previous losses in last week. After making a low of it settled at levels. Dollar index is trading lower for the 8 th consecutive week by declining as much as 7.74%. Market is likely to see a mild higher correction before resuming its downtrend. As per the Fibonacci principle, market is witnessing a crucial support at levels (50% retracement of the range levels). Sustained trade above is possible to take a higher correction. In case market breaches the support at is likely to drop till levels. Nevertheless, a break and closing above (trend line resistance) confirms uptrend for short term. We expect dollar index to see a higher correction before resuming its downtrend. However, on the lower side key level is at levels sustain above is likely to trade sideways to higher bias for this week. NASDAQ DJIA S/P 500 INDEX

4 EUR / USD- SPOT EURO /USD SPOT Buy at TP SL Particulars This week Last week % change MSCI Europe % Euro 1-Month % Euro 3-Month % FUNDAMENTAL REVIEW The Euro strengthened against dollar, yen and Indian rupee in last 15 days. Its appreciation was attributed to slowing US economic recovery, positive stress test result declared by European banks. Release of positive economic numbers from the euro zone added strength to the currency. On the other side, US economy growth has been flattering on decrease in consumer confidence index, rise in unemployment rate and continuing job claims and lower growth forecast by Federal Reserve resulted into heavy volatility in the currency market. There are certain positive factors which support the euro to strengthen are weaker economic data from US, the debt concern in southern Europe and uncertainty about the growth has slowed down. Economic data released by Europe also seen positive impact on euro for short term. There are certain risk factors also need to consider like market recovery are quite uneven, expectation of fiscal policy tightening would have negative impact on euro zone. Overall, we are expecting Euro to appreciate for short term against Dollar but appreciation probably is limited and in general it could be too early to believe that European debt issue is settled. Technically, we expect Euro to trade higher and recommend buying if market fails to breach the support at levels. TECHNICAL SNAPSHOT The Euro witnessed an upside movements in the last week and after making a high of it settled at levels. Candlestick principle suggests market to trade sideways to higher for this week. However, on the higher side resistance is at (38.2% retracement of the band levels). Only on breach and sustained trade above is likely to extend its gain. Incase market fails to breach the resistance at levels possible to trade sideways. Closing above the weekly short term (9, 18) EMA suggests market to remain higher. The key level on the lower side is at levels.

5 GBP/USD- SPOT GBP/USD SPOT Buy at TP SL FTSE 100 INDEX DAX INDEX GBP1M BGN CURNCY GBP3M BGN CURNCY FUNDAMENTAL REVIEW The British pound appreciated against dollar and hit week s high on Friday after release of lower-than-expected US GDP data. Decline in US economy growth negatively affected the dollar demand, which helped sterling to appreciate. It closed at , up by 1.8 percent. UK GDP grew by 1.1 percent against 0.6 percent forecasted by economist. The increasing in service sector, manufacturing activity and construction growth were most impressive. The most important task by David Cameron s government has been to drag public finance back to sustainable level. The UK economy is still facing heavy public debt burden and huge public deficit. Moreover, government also cut welfare spending and increase in sales tax to decrease the budget deficit. But Mr. Andrew member of Monetary committee favored for interest rate hike which is surprising as Government already increased tax burden and if further increase occurred it will hamper economic growth. We are still expecting that sterling GBP to remain flat or on appreciation note supported by weak dollar. Moreover, European market also recovered and investor shifted to ASIA, EUROPE and Other safe heaven economy. Technically we expect to trade higher and recommend buying for this week TECHNICAL SNAPSHOT: As said earlier sterling traded higher in last week by extending the previous trend. Initial bias remains upside for this week. Market has breached the trend line resistance and closing above the same suggests pound to gain further. As per the moving average principle, recently market has breached the medium term EMA (45) weekly and trading above suggests sterling to remain higher. The immediate resistance on the higher side is at levels on breach of the same is likely to extend its gains till levels. The momentum indicator RSI (14) weekly settled at 0.59 levels and still has the potential to move higher.

6 USD/JPY-SPOT USD/JPY SPOT Sell at 86.7 TP 84.8 SL FUNDAMENTAL REVIEW NIKKIE INDEX JPY1M BGN CURNCY JPY3M BGN CURNCY The Japanese yen remained volatile last week. It showed 2010 high against dollar on account of US weak economic data and decrease in quarter GDP of US market. Weak confidence in US economy surged yen to appreciate against dollar. On Friday, greenback depreciated against yen by 0.4 percent and settled at If we consider week on week change than it nearly appreciated 1.1 percent against greenback. If we consider long term factor there might be some risk depicts in Japanese economy such as based on purchasing power parity yen is overvalued against euro and dollar. Moreover global financial crisis decrease at lower pace which will increase the demand for Japanese bond and it will hamper the growth of export. Moreover, deflation is key concern in Japan due to this interest rate hike also not possible. So when deflation situation hover and less demand in market then next best option is artificial weakening of currency. TECHNICAL SNAPSHOT The Japanese yen resumed its downtrend in last week by Overall, yen remain volatile during this week and slightly depreciate at the end of week. But if US showed any weaker outlook it might be seen further appreciation. Technically we expect we expect yen to trade lower and recommend selling reversing the previous trend. After making a low of it settled at levels. Market has broken the support at levels (Previous weeks low) sustained trade below is possible to drop further till levels. Trading below the weekly short term (9, 18) EMA suggests market to remain lower. The momentum indicator RSI -14 weekly ended at 0.38 levels and still has the room to test oversold zone. However, on the higher side resistance is at levels (Previous swing low) suggesting yen to remain lower unless if it breaks levels.

7 ECONOMIC DATA RELEASES Date Time Event Survey Prior Revised 8/2/ :30 EC PMI Manufacturing JUL F /02/2010 IN Exports YoY% JUN % /02/2010 IN Imports YoY% JUN % - - 8/2/ :30 US ISM Manufacturing JUL /02/ :30 US ISM Prices Paid JUL /02/ :30 US Construction Spending MoM JUN -0.50% -0.20% - - 8/3/ :30 EC Euro-Zone PPI (MoM) JUN 0.40% 0.30% /03/ :30 EC Euro-Zone PPI (YoY) JUN 3.10% 3.10% - - 8/3/ :00 US Personal Income JUN 0.20% 0.40% /03/ :00 US Personal Spending JUN 0.10% 0.20% /03/ :00 US PCE Deflator (YoY) JUN 1.30% 1.90% /03/ :00 US PCE Core (MoM) JUN 0.10% 0.20% /03/ :00 US PCE Core (YoY) JUN 1.30% 1.30% /03/ :30 US Factory Orders JUN -0.30% -1.40% - - 8/3/ :30 US Pending Home Sales MoM JUN 3.70% % /03/ :30 US Pending Home Sales YoY JUN % /04/ :30 US ABC Consumer Confidence 1-Aug /04/ :30 US Domestic Vehicle Sales JUL 8.90M 8.57M /04/ :30 US Total Vehicle Sales JUL 11.60M 11.08M /04/ :30 EC PMI Services JUL F /04/ :30 EC PMI Composite JUL F /04/ :30 EC Euro-Zone Retail Sales (YoY) JUN 0.10% 0.30% 0.20% 08/04/ :30 EC Euro-Zone Retail Sales (MoM) JUN 0.00% 0.20% 0.10% 08/04/ :30 US MBA Mortgage Applications 30-Jul % /04/ :00 US Challenger Job Cuts YoY JUL % /04/ :45 US ADP Employment Change JUL 35K 13K /04/ :30 US ISM Non-Manf. Composite JUL /05/ :00 IN Primary Articles WPI YoY 24-Jul % /05/ :00 IN Fuel Power Light WPI YoY 24-Jul % /05/ :00 IN Food Articles WPI YoY 24-Jul % /05/ :15 EC ECB Announces Interest Rates 5-Aug 1.00% 1.00% /05/ :00 US Initial Jobless Claims 31-Jul 455K 457K /05/ :00 US Continuing Claims 24-Jul 4520K 4565K /05/ :00 US ICSC Chain Store Sales YoY JUL % /06/ :00 US Change in Nonfarm Payrolls JUL -60K -125K /06/ :00 US Change in Private Payrolls JUL 90K 83K /06/ :00 US Change in Manufact. Payrolls JUL 10K 9K /06/ :00 US Unemployment Rate JUL 9.60% 9.50% /06/ :00 US Avg Hourly Earning YOY All Emp JUL 1.60% 1.70% /06/ :00 US Avg Hourly Earning MOM All Emp JUL 0.10% -0.10% /06/ :00 US Avg Weekly Hours All Employees JUL /07/2010 0:30 US Consumer Credit JUN -$5.6B -$9.1B - -

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