15th April 2019

INR likely to open around 69.15

Risk appetite is back in markets on the back of good Chinese trade data and on hopes of a good earnings season. JPY weakened and EUR is stronger. USDJPY is trading at 112 and EUR is at 1.13.  US yields jumped on Friday, with the 10y now at 2.55%.

This is a holiday-shortened week for INR with no real trigger to cause a large directional move either side. Flows have been muted in April, in line with the caution related to election results. The Supreme Court has asked for a status quo on the Arcelor-Essar battle and that Arcelor should not deposit the 42000 cr money till the NCLAT passes an order on April 23rd. There is a dispute going on between Standard Chartered Bank and other creditors regarding the split of the package, and the Bank had approached the Supreme Court. Overall, flow situation is not as rosy as it was in March and this is reflected in the INR move back above 69. INR continues to be in a zone with no threat in either direction. The lack of realized volatility for a long period of time tends to bring in a violent move later on and that’s something one needs to be cognizant of over the medium term. Option strategies continue to be more suited for hedging both imports and exports.

16 Th April 2019

INR likely to open around 69.40

The Rupee continues to hover around in a range, and yesterday saw some depreciation presumably due to some IPO related outflows. Otherwise, yesterday was a relatively quiet day for currencies in general, with EUR trading flat at 1.13 and USDJPY at 112.00.  Brent continues to trade around the 71-71.25 band.

March trade deficit came in at 10.9 billion USD, slightly higher than the 9.6 billion print for February. And since oil moved higher in March, one can expect some uptick in the trade deficit for April (generally oil prices impact the oil import bill with a one month lag). This trade deficit print is unlikely to move the needle for USDINR.

No major data releases or events are due for today, and the Rupee is likely to move sideways and react to ad hoc flow information.

18th April 2019

INR likely to open around 69.50

The Dollar continues to be strong against most currencies, with EUR below 1.13 and USDJPY hovering around 112.00. Yesterday’s China growth data surprised on the upside but did little to boost risk appetite in markets. Brent is trading around 71.40, after being above 72 during yesterday’s trading.

As Indian elections move towards the next phase, there is no sense of the potential outcome, though markets seem to hope that the NDA will scrape through. In the interim, since there is a lack of any positive news, INR could continue to drift along, with small depreciation bias. Given the digital nature of the event and the possibility of a large move in either direction,  one can look at plain options or structures such as range forward,  which extend the hedge rate to a broad range.

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