MORNING COFFEE 8-JUNE-2017 FROM CEO'S DESK CURRENCY USDINR

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1 8-JUNE-2017 FROM CEO'S DESK The MPC left the repo rate unchanged as expected. It cut SLR by 50bps to 20% to give more flexibility to banks to comply with LCR requirements from Jan'19. The HTM requirements for banks was left unchanged. The bond markets saw the MPC statement as one preparing markets for August rate cut. Yields dipped 7bps from 6.63 to Rupee strengthened slightly post policy but rate cut expectations point for slight weaker rupee since yields are coming down. Nationalized banks were seen protecting SBI QIP related inflows could keep Rupee supported. On the global front, majors traded range bound ahead of key ECB policy and UK elections. The Euro could rally only if ECB revises growth forecasts upward and mentions outlook for risks as balanced. The Euro could weaken if ECB states strong Euro as threat to inflation picking up. Key level on upside is and key support is The Sterling could rally if Theresa May's party, the Tories win by 50+ seats as it would strengthen her hand in Brexit negotiations key on upside. The results would be called around 5am IST tomorrow though early estimates would come around 2:30am. Range trade expected with slight weaker bias. CURRENCY USDINR EURUSD GBPUSD USDJPY COMMENTS Indian rupee fell against the dollar, in line with its Asian peers, as risk appetite remained muted ahead of key economic and political events in the U.S. and Europe Euro weakened against the greenback on Wednesday after news that central bank was preparing to lower its annual inflation forecast for the next three years Pound is gaining as Prime Minister Theresa May is on course to increase her majority in parliament in Britain's election on Thursday, opinion polls showed on Wednesday US Dollar traded narrowly against the yen in the morning, taking a respite from a rise in New York before the ECB meeting, testimony by a former U.S. FBI chief and UK election INTRADAY OUTLOOK BULLISH BULLISH BULLISH BEARISH COMMODITIES/DI GOLD SILVER WTI CRUDE DOLLAR INDEX INFLOWS ( ) FII DII * Figures are in Rs. Crores LAST CHANGE % CHANGE REGION GLOBAL INDICES LAST CHANGE % CHANGE $1, % HANG SENG % $ % ASIA KOSPI % $ % NIKKEI % % SENSEX % INDIA NIFTY % BUY SELL NET CAC % EUROPEAN DAX % FTSE % US DOW % NASDAQ %

2 COUNTRY TIME MAJOR GLOBAL EVENT ACTUAL FORECAST PREVIOUS IMPACT ON FX 7/6/2017 AUD 7:00 AM GDP q/q 0.3% 0.2% 1.1% BULLISH USD 8:00 PM CRUDE OIL INVENTORIES 3.3M -3.1M -6.4M BEARISH 8/6/2017 AUD 7:00 AM TRADE BALANCE 0.56B 1.91B 3.17B BEARISH CNY 9:00 AM TRADE BALANCE 282B 336B 262B BEARISH GBP ALL DAY PARLIAMENTARY ELECTIONS EUR 5:15 PM MINIMUM BID RATE 0.00% 0.00% EUR 6:00 PM ECB PRESS CONFERENCE CENTRAL BANKS INTEREST RATES LIBOR RATES ON 1M 3M 6M 1Y CENTRAL BANK RATES NEXT MEETING USD RBI 6.25% August 2, 2017 EUR FED 1.00% June 14, 2017 GBP ECB 0.00% June 8, 2017 JPY BOE BOJ RBA 0.25% -0.10% 1.50% June 15, 2017 June 16, 2017 July 4, 2017 INDIA'S KEY RATES 10 YEAR CARRY LAST CHANGE AGAINST USD REPO RATE 6.25% REVERSE REPO 6.00% BOND YIELD TRADE INFLATION 2.99% CRR 4.00% INDIA 5.56% INR 5.00% GDP (Q/Q) 6.10% SLR 20.50% US 2.18% 0.02 EUR 1.00% SLR- 20% from June 24, 2017) GBP 0.75% JPY -1.10% MONTH END FORWARD PREMIUM- IN RUPEES (BID RATE) MONTH 1M 2M 3M 6M 1Y 2Y 3Y 4Y 5Y 10Y USDINR EURINR GBPINR JPYINR

3 OTHER MAJOR GLOBAL NEWS * US Crude down 4% after surprise stockpile build up by 3.3 mio * Euro falls as ECB expected to cut inflation outlook through 2019 * Qatar debt rating downgraded by S&P as riyal hits 11-year low CHART OF THE DAY - USDJPY SPOT RATE TECHNICAL OBSERVATION After taking support near levels, the USDJPY pair is retracing back on the upside. However, this pullback is likely to remain short lived and the pair can be seen moving southward towards channel support of 108 levels. INTRADAY RANGE [NEGATIVE BIAS] CURRENCY 3 MONTHS OUTLOOK 6 MONTHS OUTLOOK RANGE OUTLOOK RANGE OUTLOOK $ INDEX BULLISH BULLISH EURUSD BEARISH BEARISH GBPUSD BEARISH BEARISH JPYUSD BULLISH BULLISH AUDUSD BEARISH BEARISH USDCAD BULLISH BULLISH

4 CURRENCY DAILY TECHNICAL CHART

5 INTEREST RATE DIFFERENTIAL CHARTS (VS US DOLLAR)

6 CURRENCY OPTION STRATEGY RECOMMENDED ON:- 26/05/2017 FORWARD RATE: (WHEN RECOMMENDED) STRATEGY FOR: IMPORTER SPOT RATE: (WHEN RECOMMENDED) STRATEGY We suggest a seagull strategy for June expiry. We recommend buying one call option of strike, selling one call option of strike along with selling put option of strike with a net outflow of 5 paise. This strategy is suitable for those impoters who want to hedge on the upper side (Better than forward rate) while simultaneously participating on the downside JUN '16 EXPIRY PREMIUM PAYOFF TABLE BUY PAID BUY NET RATE SELL 0.15 RECEIVED IF RATE ON SELL CALL SELL PUT FOR SELL 0.10 RECEIVED EXPIRY NET PAYOFF IMPORTER NET PREMIUM PAID PAYOFF CHART Market Price Net rate for importer 61

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