Trend of sharp two way moves; broad direction still of INR strength

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Reading Time: 2 minutes

Market Highlights & Commentary:

  • INR opens at 69.96 as against yesterday close of 69.72 and may trade the day mixed between 69.70-70.23. 
  • RBI fixes overall cap on ECB as 6.5% of GDP. We think it is a prudent step to limit excessive exposure to foreign currency. This also means that unlike earlier, corporates would to also track how much is available limits at country level before planning ECBs.  As of now for FY19, thee is space of about USD 30bn.
  • Yesterday Bank of England concluded its monetary policy meeting and maintain a status quo on back on rising uncertainty over Brexit.
  • From US, Get Mattis, defense secretary resigned as he did not agree with Trump for removal of troops from Syria. This also spooked US equities.  
  • Oil price dip further low  around USD 55 a barrel. Technically, Oil weakness may take a pause around 55 levels, but closes below for few days possibility of 45-46 cannot be ruled out.
  • This morning Asian/Emerging currencies are mixed while equities are weaker. CNY is trading flat around 6.89.

Technical Corner & strategy for the day:

  • These days market is seeing sharp two way movements, which are unusual. This indicates there is active interest on both sides of market. This also means that although your view has changed to INR appreciation, a weakness spike to 1 to 2 rupee can not be ruled out. Such spikes should be used to hedge exports
  • USDINR is currently trading under volatility and uncertainty. Yesterday price has tested 69.60 levels, if in coming days price breaks below these levels then we may see 69.00-69.20 levels. Hence exporters are suggested to cover exports on upticks above 70+ while importers may wait for better levels.
  • GBPINR currently around 88.77 levels, if price breaks below 88.50, possibility of price seeing further weakness cannot be ruled out towards 87.00
  • EURINR looks to be mixed at current levels of 80.12. If price holds above these levels, we may see 80.30-80.50 or if fails price is likely to trade around 79.70.

Yesterday’s Market Recap:

  • Yesterday INR closed with major gains at 69.70 after opening at 70.67.  Other currencies including EUR,GBP and JPYtoo remained weaker against INR.
  • The benchmark NSE closed little change and closed at 10,951.