Nivesh Monthly Dollar/Rupee Outlook 3 January, 2018 Currency LTP Chg% MoM Chg % Yoy USDINR 63.92-0.79-5.93 EURINR 76.38-0.13 6.88 GBPINR 86.06-0.84 2.64 JPYINR 56.72-1.29-2.86 DX 91.99-1.05-10.07 EURUSD 1.2003 0.88 14.14 GBPUSD 1.3504-0.19 9.45 USDJPY 112.70 0.11-3.58 USDCNY 6.5044-1.64-6.34 Dollar Set For Worst Performance Since 2003 2017 was the worst year for the U.S. Dollar Index as it plunged more than 10% and settled below 92.00 levels. It was the biggest yearly fall since 2013. It made yearly high of 103.81 levels (3 January 2017) and settled at 91.99 levels. The last time it faced such difficult times was in 2003 when it lost 14.6% of its value on yearly basis. The monetary policy of US Federal Reserve was the most aggressive among all central banks last year. It raised interest rates by 75 basis point under the backdrop of stronger growth and lower unemployment. US economy grew at a 3.3% annualized rate, strongest growth since Q3 2014 and the unemployment rate touched 4.1%, the lowest since 2000. For most of the year, President Trump struggled to advance his economic agenda. This along with a host of other factors including rattling between the U.S. and North Korea hurt the confidence of global investors who moved away from the dollar in 2017. Looking ahead to 2018, the US Federal Reserve could be the most hawkish central bank compared to ECB, BOE, and BOJ. Further, Fed chair election will remain in focus in start of the 2018. Ultra-low unemployment, tax cuts, consumer and business rising confidence will lead to faster growth in the coming year. All of this is expected to drive inflation and growth higher in US, leading to a recovery of the greenback in 2018. Seema Yadav Research Analyst Tel: +91-0731-4262702 seema.yadav@indianivesh.in India rupee (INR) has outperformed against the dollar, in addition to global peers. Domestic factors like strong political mandate for BJP in UP elections, passage of GST Bill and a hawkish RBI stance have boosted the rupee. Against the dollar, rupee has appreciated 4.90% in 2017. Looking ahead, Union budget 2018-2019, implication of GST, impact of higher crude oil prices on inflation and CAD will be important trigger for the rupee.
USD-INR January Future LTP Sell around 1 Target 2 Target Stop loss 63.65 63.90-64.00 63.00 62.50 64.65 LTP: 2 January 2018. USD-INR witnessed 0.79% correction last month and settled at 64.05 levels compared to previous month close of 64.6475 levels. As was expected the pair was near to the 63.95 predicted levels. On the monthly chart, USD-INR has broken down its immediate support of 63.98 levels and formed a long bearish candle stick. Further, as per the wave count drawn on the above chart it is showing a downward irregular correction wave which started from the peak of 69.2150 levels. This yet is creating probability of bearishness in USD-INR. Now, 63.70 levels will act as a crucial support which is coinciding with 50% Fibonacci Retracement of its 1 August 2013 to 2 May 2014 fall. Below it the pair may test 62.40 levels and below. On the other hand, 65.20 levels will represent a test of resistance for the month and only a break above it could result in recovery rally towards 66.85 to 67.20 levels.
Key Indicators which Lifted Clutter in December 2017 Indicators (U.S) Actual Forecast Previous Non-Farm Employment Change 228K 198K 244K Unemployment Rate 4.10% 4.10% 4.10% CPI m/m 0.40% 0.40% 0.10% Core CPI m/m 0.10% 0.20% 0.20% Federal Funds Rate <1.50% <1.50% <1.25% Core Retail Sales m/m 1.00% 0.60% 0.40% Retail Sales m/m 0.80% 0.30% 0.50% Building Permits 1.30M 1.27M 1.32M Final GDP q/q 3.20% 3.30% 3.30% CB Consumer Confidence 122.10 128.20 128.60 Indicators (Japan) Actual Forecast Previous Consumer Confidence 44.9 44.8 44.5 Final GDP q/q 0.60% 0.40% 0.30% Revised Industrial Production m/m 0.50% 0.50% 0.50% Trade Balance 0.36T 0.27T 0.35T National Core CPI y/y 0.90% 0.80% 0.80% Tokyo Core CPI y/y 0.80% 0.70% 0.60% Unemployment Rate 2.70% 2.80% 2.80% Retail Sales y/y 2.20% 1.10% -0.20% BOJ Core CPI y/y 0.60% 0.50% 0.50% Indicators (China) Actual Forecast Previous Trade Balance 264B 238B 254B USD-Denominated Trade Balance 40.2B 34.9B 38.1B CPI y/y 1.70% 1.80% 1.90% PPI y/y 5.80% 5.80% 6.90% Industrial Production y/y 6.10% 6.10% 6.20% Fixed Asset Investment ytd/y 7.20% 7.20% 7.30% Foreign Direct Investment ytd/y 9.80% 1.90% Retail Sales y/y 10.20% 10.30% 10.00% Indicators (Euro zone ) Actual Forecast Previous German ZEW Economic Sentiment 17.40 17.90 18.70 French Flash Manufacturing PMI 59.30 57.20 57.70 French Flash Services PMI 59.40 59.80 60.40 German Flash Manufacturing PMI 63.30 62.10 62.50 German Flash Services PMI 55.80 54.60 54.30 Flash Manufacturing PMI 60.60 59.80 60.10 Flash Services PMI 56.50 56.00 56.20 Final CPI y/y 1.50% 1.50% 1.50% German Ifo Business Climate 117.20 117.60 117.60 Indicators (UK) Actual Forecast Previous Manufacturing PMI 58.2 56.6 56.6 Construction PMI 53.1 51.2 50.8 Services PMI 53.8 55.2 55.6 Manufacturing Production m/m 0.10% 0.10% 0.70% CPI y/y 3.10% 3.00% 3.00% Average Earnings Index 3m/y 2.50% 2.50% 2.30% Unemployment Rate 4.30% 4.20% 4.30% Retail Sales m/m 1.10% 0.40% 0.50% Current Account -22.8B -21.5B -25.8B Final GDP q/q 0.40% 0.40% 0.40% Indicators (India) Actual Forecast Previous Index of Industrial Production 2.2% - 3.8% Wholesale price-based inflation oct 3.93% - 3.59% Current account deficit $7.2 billion - $15.0 billion Fiscal Deficit - - - CPI based inflation October 4.88% - 3.58% Forexfactory.com, tickernews, investing.com.
Key Economic Data and Events to Watch in January, 2018 India Will impact Rupee 12/01/18- -IIP (y/y chg) (Base 2011-12=100) 15/01/18- WPI inflation 31/01/18 - Government Finances U.S. Will impact Dollar Index 04/01/18 - FOMC Meeting Minutes 05/01/18 - Non-Farm Employment Change, Unemployment Rate 12/01/18 - CPI m/m, Core CPI m/m 26/01/18 - Advance GDP q/q Europe Will impact EUR 05/01/18- CPI Flash Estimate y/y 25/01/18- ECB Minimum Bid Rate 31/01/18 - CPI Flash Estimate y/y U.K. Will impact GBP 03/01/18 - Construction PMI 10/01/18- Manufacturing Production m/m 16/01/18 - CPI y/y 26/01/18 - Prelim GDP q/q Japan Will impact JPY 09/01/18 - Consumer Confidence 18/01/18 - Revised Industrial Production m/m 23/01/18- Monetary Policy Statement, BOJ Policy Rate, BOJ Press Conference 30/01/18 - National Core CPI y/y China Will impact Yaun 10/01/18 - CPI y/y 12/0/18 - Trade Balance 19/01/18 - GDP q/y 19/01/18 - Industrial Production y/y Source: Forexfactory.com, ticker news, investing.com
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