WEEKLY CURRENCY REPORT MONDAY, 25 -JULY-2016 CYGNUS CURRENCY RESEARCH REPORT SPOT RATE RBI REF RATE Major Crosses USDINR - Forward Rates (In Paise) EUR/USD 1.0975 Duration Bid Ask PAIR 7/22/2016 %Change 7/22/2016 GBP/USD 1.3109 1 Month 1 2 USDINR 67.1890-0.18% 67.1355 AUD/USD 0.7464 2 Month 38 39 EURINR 73.7796 0.68% 88.9478 USD/ 106.13 3 Month 73 74 INR 63.2800 0.38% 63.4100 USD/CHF 0.9869 4 Month 105 107 GBPINR 87.081 3.22% 88.9478 USD/CAD 1.3127 5 Month 142 144 Dollar Index 97.41 6 Month 173 174 Currency Spot Technical Levels 7 Month 206 207 PAIR LTP(22-7-16) Support 1 Support 2 Resistance 1 Resistance 2 TREND 8 Month 235 237 USDINR 67.19 67.09 66.99 67.24 67.30 UP 9 Month 268 269 EURINR 73.78 73.57 73.36 74.06 74.34 SIDEWAYS 10 Month 304 306 INR 63.28 63.07 62.86 63.54 63.80 DOWN 11 Month 339 340 GBPINR 87.08 86.84 86.59 88.25 89.41 SIDEWAYS 1 Year 370 372 GLOBAL COMMODITIES MAJOR MARKET INDICES Institutional Activity on 22-06-2016 (Currency Markets)* Commodity Close % Change Index Close % Change INSTITUTION BUY SELL NET GOLD 30871.00-0.43 NSE 8508.7 31.1 FII / FPI 4264.48 3828.85 435.63 SILVER 46321.00-0.64 BSE 27803.24 92.72 DII 2163.06 1546.74 616.32 CRUDE 2961.00-2.53 DJIA 18570.85 0.29 * The above FII/FPI & DII activity is combined across NSE, BSE & NAT.GAS 187.30 3.94 NASDAQ 5100.16 0.52 MSEI collated on the basis of trades executed by them COPPER 333.55-1.17 FTSE 6730.48 0.46 ALUMIN 107.45 0.56 HANGSENG 21964.27-0.16 CURRENCY FUTURES (NSE) AS ON 22-07-2016 NICKEL 696.40-3.01 NIKKEI 16627.25-1.09 PAIR OPEN HIGH LOW CLOSE USDINR 67.21 67.2255 67.09 67.095 EURINR 74.03 74.295 73.945 73.96 INR 63.56 63.62 63.165 63.2775 GBPINR 88.76 89.22 87.815 87.9425 JULY DAY India US LONDON JAPAN HONGKONG CHINA KOREA AUSTRALIA 18th Mon HOLIDAY 19th 20th 21st 22nd DAY Tue Wed Thur Fri MARKETS - LAST WEEK (18th July - 22nd July) Stock Markets DAY CURRENCIES COMMODITIES JULY DAY USDINR GBP-INR EUR-INR -INR CRUDE GOLD Downtrend 18th Mon Uptrend 19th Tue 20th Wed 21st Thur 22nd Fri
DOLLAR INDEX USD / Dollar Index: US Markets started with a positive note owing to the better Q2 results from major corporate. Markets in Emerging markets were hinging positive on the hopes that the announcements on Stimulus packages from Central banks like BoJ, ECB. Dollar Index started trading firm from Tuesday. Dollar Index touched 4 months high on Wednesday after release of Housing data. GBP also had a mid week vantage over USD in response to a better data on UK Employment. The earlier data release on Inflation was also better off. By mid week, it had breached the 97 levels ever since March 2016. Unemployment data and claimant data also were positive this time, leading to further strong going of USD. By Thursday evening, DXY retraced from its 97 levels, though its in and around its last 5 months high figure. On Friday it further went up by 0.5%. However owing to rise in the risk appetite in global markets, the demand for low yielding currencies fell, thus capping the further rise of Dollar (Index). DOLLOR INDEX Dollar Index: Dollar Index is expected to be on a positive mode this week also, owing to the twin advantage of better economic data from the US, plus, the consistent combined weakness of the other currencies in the basket. FOMC meet and BoJ meet shall give a change in direction by the weekend, factoring in the rate hike announcments that may come in by the year end, though the present week's data release may fall in line with the market expectations USDINR USD-INR: USD-INR started the week with a negative note, owing to Dollar bids by Oil PSUs and for Defence payment by the Govt. FII inflows into Indian markets continued to be positive which propped the weakness. RBI governor s note on the valuation levels of INR is fairly priced is also worth noting here. He warned that any efforts to devalue Rupee would bring in Inflationary pressure. From Tuesday Rupee entered into a range bound zone. Monsoon Session started in Parliament this week. 25 bills including the GST bill to be discussed for being passed before the session ends on 12 th Aug 2016. Govt Planning to allocate Rs 22,915 Crores for recapitalising 13 Public Sector Banks. This brought in positive impact in Indian markets, along with Dollar sales by foreign banks, led to Rupee appreciation by 10 paisa over the previous day close. By mid week USDINR depreciated to 67.25 levels owing to fall in Equity markets here. GST bill discussion was moved to the next week. On 21 st the results of some big corporates and Banks had led to the weakening of Equity markets here. Nevertheless Dollar sales by foreign bank helped to contain the USDINR fall. PSU bankers bought USD and did the balancing act. However, on Friday Rupee strengthened to 1 week s high figure, largely due to FII inflows and due to Corporate Dollar sales. Forex reserve in India also grew by 1.41 billion by mid July EXPECTATIONS: USDINR shows an uptrend owing to the strength of the Dollar. Dsicussion on GST is expected to happen this week in the parliament. Any negative developments in GST front will push the Rupee in a negative note further HEDGING SUGGESTION USDINR hedging: USDINR had been on a depreciating trend over 3 weeks untill last week. This phase reversal along with better dollar index may take USD-INR levels to near 68 levels in a months' time.. USDINR breaching 67.40 levels can see further upward surge.
EURINR EUR-INR : Euro also started off with a positive note against USD. But by midweek, Euro weakened since the data on EU s Current account surplus of May fell to 30.8 Bn Euro as against the previous figure of 36.4 Bn. CONSUMER Confidence index also fell in July. By Mid week EUR-USD was trading stronger again, in anticipation of ECB policy decision. In line with the British view, market was expecting that there won t be any instant rate cut /policy changes. The ECB meet on 21 st july left the key interest rates unchanged at current levels, in the backdrop of the Brexit results. Deposit rates @ - 0.4% and marginal lending rate @ 0.25 were left unchanged, so was the 80 billion Euro Asset Purchase target. However ECB President indicated that ECB could be ready to deploy a wide range of Easing Tools sooner, to prop up the Economy in the months to come. EUR/USD bounced off from its 4 months low. Euro went back to weak note in anticipation of the outcome of the BoE announcement. Since BoE didn t announce any change in its policy, EUR/USD bounced back, as it met with the market consensus of no policy changes in BoE. On Friday Euro fell against the dollar due to surge in Dollar Index and also due to weak data from this region EURINR shall continue to remain range bound like the current levels for this week ( under current market conditions). Meetings of the central banks in this week will decide the course of its action. Hedging Suggestions: Very near term Exports may be hedged. GBPINR
GBPINR GBP-INR: GBP started off with a positive note against USD on Monday. However it weakened overnight. The new PM also planned to meet the German Chancellor Ms Angela Merkel to discuss on the UK s exit plan from the EU. Martin Weale (Policy maker of BOE) indicated in the week start that BoE should not just get into policy moves before getting firmer evidence. This was reiterated by Ms.Kristin Fores (policy maker BoE) that there is no urgence for any stimulus package to British economy. They would wait for concrete data evidence about the negative impact on the British economy by the Brexit results and then consider a rate cut. Any budgetary measure is likely to happen in autumn, followed by a Monetary easing by BoE. Further in its July report, BoE has indicated that there is no significant impact on business activities, due to Brexit. British PM in her meet with German Chancellor has reassured that UK will not walk out from its European friends and that rather, it would try to deepen the relation with EU countries. IMF had cut its World Growth forecast from 3.2% to 3.1% for the year 2016 and from 3.5% to 3.4% for 2017, owing to Brexit. The growth rates for UK was lowered to 1.7% from 1.9% for 2016 and to 1.3% from 2.2% for 2017 Hedging Suggestions: Exports may be hedged for very near term recievables. GBPINR will continue to be in a volatile, yet weaker note this week again. The latest data releases show that there is slight material evidence to prove that the Brexit has impact in UK economy. The Q2 GDP figures to come in this week. Exporters to hedge their near term exposures. INR INR started with a negative note in the week start, compounded with the fact as the Turkey s coup attempt was overcome and hence did not have much risk impact on markets. Anyhow it turned around by Tuesday as Asian markets weakened, leading to a safe haven appeal for. USD touched to 106.5 levels in anticipation of market s expectation of a Monetary and Fiscal easing stimulus from BoJ. It crossed 107 levels as a Japanese news channel reported that a 20 trillion Yen stimulus package to be rolled out soon, as against the earlier expected 10 trillion Yen package. Subsequently on Thursday evening, the Governor of BoJ Mr.Haruhiko Kuroda strongly ruled out the idea of Helicopter funds (printing of fresh currencies to be released in the market). USD bounced back from 107.49 to 105.88 due to this announcement. However depreciated by around 0.3% against USD due to rise of risk appetite in global market sentiments which inturn has led to the decline of demand for low yielding currencies. BoJ to hold a review meet by next week Thursday and Friday. -INR: INR is expected to be in the weak zone. This can be attributed to the surging Dollar Index and due to the hope that there would be Easing in Japanese Economy. BoJ meeting in the 2nd part of the week will decide the course of. In the event of announcement of Easing, USD likely to cross 110 levels. INR will take an appreciating trend then, crossing 0.65 levels. Near term Imports may be covered. Hedging suggestion: Import payments of in the near terms may be covered
Economic Calendar DATE TIME CURRENCY DATA FORECAST PREVIOUS MonJul 25 1:30pm EUR MPC Member Weale Speaks 107.7 108.7 TueJul 26 WedJul 27 7:30pm USD CPI y/y 95.6 98 2:00pm GBP German ZEW Economic Sentiment 0.50% 0.40% 6:00pm USD Building Permits 0.30% -0.30% 8:00pm USD Average Earnings Index 3m/y -2.3M 11:30pm USD Claimant Count Change ThuJul 28 USD Crude Oil Inventories <0.50% <0.50% 6:00pm USD Retail Sales m/m 261K 253K FriJul 29 Tentative Minimum Bid Rate 10:30am ECB Press Conference Tentative Philly Fed Manufacturing Index SatJul 30 6:00pm USD Unemployment Claims 2.60% 1.10% 1:30am EUR Manufacturing PMI Disclaimer The information and views shared in this report are derived from Reliable sources from the market. The suggestions are from a combined view of Fundamental and Technical Analysis. However markets may take any turn any ways owing to sudden unforseen developments. The time line of the recomendations also has an impact on the efficacy. Have a great time ahead! Please email your suggestions to aravind@cygnusindia.in.