11th March 2019

INR likely to open around 70

The Dollar is mildly weak against both EUR and JPY, after a dismal US jobs data on Friday. The US added just 20k jobs last month, against an expected 180k, and one of the reasons attributed to this number is the government shutdown. Wage growth was higher than expected at 0.4%. EUR is trading at 1.1230 and USDJPY at 111.10. We have to wait for next month’s NFP data to assess whether the labour market has also started to stall in the US. Fed would continue to be dovish and this jobs print would solidify their stance further.

India election dates are announced – slated to start from 11th April and results are to be announced on May 23rd. Latest opinion polls seem to indicate a hung verdict and NDA is expected to garner around 250-260 seats on an average. Election cycle would keep the Rupee from appreciating a lot unless the trend in polls shifts to a BJP win closer to the election. Another domestic news is that the NCLT has ruled in favour of Arcelor take over of Essar assets. While Essar is likely to challenge this verdict, this is one step closer to the expected flow of 6 billion Dollars.

In all, the INR range has shifted lower and as global markets continue to be stable no threat to INR is seen in the short term. Election-related volatility can pick up towards the month end, but if global factors continue to be benign, the Rupee volatility could be relatively mild.

12th March 2019

INR likely to open around 69.70

The Dollar is weaker as EUR climbed to 1.1260 level, but the big move was in GBP. The Pound jumped on news that the UK PM has secured legally binding assurances from the EU on a revised Brexit deal which can be voted on in UK parliament. The vote is scheduled today and the Pound will be very volatile ahead of the vote. GBP is above 1.32 now. USDJPY is flat at 111.40. Oil prices are higher, trading at 66.80.

On the Macro-data front, US CPI is to be released today. Unless the print is way higher than expected, it is unlikely to impact currencies in a meaningful way. India CPI is expected today and the consensus is around 2.4%, higher than the 2% print of the previous month.

For now, it is advantage INR as both domestic (elections) and international scenarios seem to have turned positive. The next important event is the FOMC meeting next week, and till then USDINR is expected to drift lower.

13th March 2019

INR likely to open around 69.60

INR maintains its appreciation bias and has broken the recent range to the downside. One can expect the momentum to continue or at least prevent a depreciation in the currency in the short term. As election season kicks-in, opinion polls show a gradual tilt towards NDA majority. Opposition alliances are yet to solidify, giving the BJP the advantage for now. FII flows continue into markets as sentiment around elections is turning positive.

The Dollar is mildly down, with EUR back close to 1.13 level and JPY at 111.20. GBP crashed as the UK parliament rejected the revised Brexit deal. There would now be a vote today on whether to go for a “no-deal Brexit” and if the vote is not in favour of such a move, Thursday would see another vote on an extension of the March 29 deadline. GBP would be very volatile and uncertain during the next two days.

India CPI came in higher than expected at 2.57%. This is unlikely to move the needle on RBI expectations as it is well below the mid-point of the RBI target range (2%-6%) and with the real rates in India being high, RBI has enough wiggle room to front-load interest rate cuts.  US CPI came in lower than expected, which means Fed dovishness is set to continue. In the short term, it is advantage INR.

14th March 2019

INR likely to open around 69.60

USDINR continues to move lower as this is the path of least resistance for the currency pair. The Dollar continues to be mildly weak as EUR has recovered most of its post-ECB losses. EUR is trading at 1.1325 and USDJPY is flat at 111.30. GBP is sharply up after the UK parliament voted to reject a no-deal Brexit and another vote is scheduled today on whether to extend the March 29th deadline.  An extension of the Brexit deadline is positive for GBP.

Brent is up and trading above 67.50 on inventory data. There was also a report that the US is aiming at bringing down Iranian oil exports below 1 million barrels per day, by renewing sanctions of countries buying Iranian oil. Oil price is currently out of fashion for the Rupee market as the sentiment on flows has turned positive. But a sharp oil move towards 70 can make markets take notice and put some pressure on the Rupee. For now, though, oil moves are not too important.

Election opinion polls are showing a gradual increase in NDA seats, helping INR. As global markets are relatively calm and major China deal headlines are missing, USDINR could continue to drift lower.

15 th March 2019

INR likely to open around 69.35

Rupee strength continues as there seems to be a positive sentiment in markets around elections and as flows have started coming back due to a benign global environment. RBI announced a 3 year FX swap auction where they would infuse INR liquidity in the short term, by buying USD and sell the USD back to markets at the end of 3y ( basically, a buy/sell FX swap with banks). Forward premium and the MIFOR up to 3y fell in response to this announcement. RBI has moved on infusing INR liquidity during the month end, as tax and other outflows are expected to result in large Rupee liquidity deficit. Till March 26th, when this deal goes through, forward premium would be subdued. Going forward, expectations of a further round of these FX swaps could keep the premium muted. Bond yields though are a bit higher as the OMO demand from RBI would come down to the extent they use FX swaps for Rupee liquidity management.

The dollar is mildly strong with EUR trading at 1.13 level and USDJPY trading at 111.90. BOJ policy is awaited and the market expects dovishness to continue. GBP is lower at 1.3240, as the UK parliament voted to extend the Brexit deadline. The near term uncertainty has abated for now and would return depending on how long the extension would be.

INR is clearly on a strengthening trend and there is no real threat to this momentum. 68.85 level is a very strong support for USDINR (the previous all-time high) and that becomes the level to watch.