USD INR view today and factors impacting it

USD INR view today (14/07/2020)

INR is likely to open around 75.30. To get the USDINR View Daily via WhatsApp Register here. Some of India’s largest companies use our USDINR views. You can also Email us to setup a 121 discussion on USDINR Hedge Strategies for your organization or to get detailed USDINR View.

USD recouped some of its losses yesterday, as intra-day risk aversion in US markets brought back US equity from the highs for this year. EUR is at 1.1340, after being higher than 1.1370. News that California has re-imposed a ban on all indoor activities led to a reversal in sentiment. Indian equities saw small gains of 0.3% yesterday. Asian markets have opened flattish today.

Coronavirus cases across the world jumped by around 200k yesterday, and the increase in mortalities remains on the lower side, despite the surge. While the overall mortality of the disease is quite low, research suggesting that the virus can cause permanent damage to vital organs makes the disease dangerous and governments wary of large and unmanageable spread. California has done a U-turn on the lockdown relaxations triggering fears that more and more states would follow suit.

India reported 28k new cases, 9k new active cases, and 540 fatalities. The fatality rate has slightly ticked up with the daily death count now firmly above the 500 mark. The infection is nowhere close to slowing down at the country level, even as the hotspot cities like Mumbai, Delhi, and Chennai are showing trends of slowing down. With Pune, Bengaluru, and Hyderabad picking up the mantle, the infection has more legs to go before a peak can be thought about. The positive test ratio for Bangalore and Hyderabad is in the 10-15% range, despite increasing testing. Pune and Bengaluru are going into a week to 10-day full lockdown, and more such actions might emerge in other problem cities/states. The economic impact of this virus is likely to be permanent as most small businesses might not survive the extended demand crash.

India CPI for June came in at 6.09% – higher than market expectations, and higher than the RBI’s comfort zone below 6%. While the print might not deter RBI from cutting rates further, the persistence of CPI is sure to create some resistance to large cuts. The Rupee has almost given up all the gains made in the move towards 74.50. If the 75.20/40 zone is convincingly broken, one can expect a bit more momentum for USDINR to the upside. While the global backdrop is balanced for now, the risk of shutdowns and US-China spat makes the outlook for Rupee a bit murky. But, positive factors like central bank liquidity could keep the door open for some INR stability. The most likely scenario for the Rupee is that the previous range of 75.40 to 76.20 might again become the de-facto range.

USD INR view today (13/07/2020)

INR is likely to open around 75.10/20. To get the USDINR View Daily via WhatsApp Register here. Some of India’s largest companies use our USDINR views. You can also Email us to setup a 121 discussion on USDINR Hedge Strategies for your organization or to get detailed USDINR View.

Friday saw USDINR attempt to move beyond the resistance zone of 75.20/75.30. But, the global backdrop changed from risk aversion to risk-positive sentiment over the course of the NY session on Friday, with US equities registering another 1.5% odd gain and USD giving up some of its gains. Asia has opened firm today, as central bank liquidity push and vaccine hopes continue to Trump virus-related concerns. EUR is above 1.13 and USDJPY is below 107, reflecting USD weakness.

Coronavirus case additions slowed to 195k due to the weekend effect. But, the overall trend continues to be that of surging cases, and low mortality. While fatality numbers are on the lower side relative to the case surge in the US, the death count was moving towards 1000 deaths a day, before being suppressed over the weekend. If deaths per day pick up fast in the next few days, markets might pay some heed to the presence of the virus after all. India has sharply higher reported cases at 29k, and the active case growth has also picked up to the 9-10k range, which is a worrying sign. The mortality count is slowly picking up in absolute numbers but remains at 2.2% growth. Places such as Karnataka and UP have announced partial lockdowns to combat the recent surge.

As we stand – 5 months after the pandemic hit countries outside China – places, where the virus was initially severe, seem to be immune, even after lockdowns are lifted. Antibody tests show that around 20% of populations in the erstwhile hotspots are now immune, but the virus spread has all but halted in these areas. While one can attribute this to higher temperatures and hotter climate, the Indian case proves otherwise. One other possible explanation being put forth is that most populations have a natural immunity to this virus through possibly what is called a T-cell response. The behavior of the virus in Mumbai, Delhi, and Chennai also seems to suggest that at a much lower threshold of infection than initially thought, the pandemic reverses course in terms of new cases and deaths. The good news is that the pandemic might not return to these hotspots once the curve peaks. In another 2 months, other emerging hotspots such as Bangalore and Hyderabad should also eventually stabilize (going by the experience in Mumbai).

The economic damage of the virus is still unmitigated, though. Global growth is expected to crash by 4.5% this year, as per IMF. While equity markets might make merry on the liquidity drug, protracted recession can lead to permanent job losses and a long-drawn demand crash. INR tends to underperform in times of global recession, and in that context we can surmise that the pressure on INR over the medium term would remain. While CNH has sharply appreciated over the past few days, the lack of phase-2 US-China deal could come back to hurt risk sentiment. In the short term, the current level of 75.20-30 might provide some resistance to USDINR and could lead to some stability and potentially some INR appreciation. But, the medium-term remains uncertain.

USD INR view today (10/07/2020)

INR is likely to open around 75.10/15. To get the USDINR View Daily via WhatsApp Register here. Some of India’s largest companies use our USDINR views. You can also Email us to setup a 121 discussion on USDINR Hedge Strategies for your organization or to get detailed USDINR View.

Following an alternating pattern, yesterday was a day of risk aversion in US markets, with the DOW falling around 1.3% and the Dollar strengthening on a broad basis. While Indian equities rose more than 1% yesterday, today might see a subdued move in the Indian equity markets. The Dollar index is again back close to 97. INR is likely to track the Dollar weakness and open weaker.

Yesterday saw another 220k additional coronavirus cases worldwide. The US reported 60k+ cases, and worryingly the number of deaths also spiked to 950+. While the mortality rate is way lower than the previous peak, the fatality count is accelerating. India reported an additional 25.7k cases yesterday – the highest ever, but active case growth remained around 6k and the rise in fatalities continues to be in the 450-500 range. While the overall mortality rate is contained, individual state governments have been engaging in ad hoc targeted lockdowns. While the economic impact of the total lockdown is studied well, the silent demand contraction due to the lockdowns and general lack of consumer confidence is being ignored by markets at present.

As an aside, a paper by 240 scientists urged the WHO to consider the possibility of air-borne transmission of the virus also, in addition to the transmission through surfaces. The paper says that micro-droplets can suspend in the air for hours and continue to carry infectious viral particles. The sheer number of super-spreader events across the world can only be explained by aerosolization of the virus and not by surface to surface contact, as per the paper. The WHO initially said that hospital procedures can produce air-borne virus particles, but there is no evidence of airborne spread in other settings. They later backtracked and announced they would investigate the possibility. If indeed confirmed, this has implications in the way public indoor places such as offices, hospitals, etc. are managed and the risk of spread even when there is no close contact with the infected.

Concerns around the virus are here to stay and hence INR is going to be under pressure for some time to come. Today is critical for the near-term direction of the currency since it is now around the resistance zone of 75-75.20. A convincing break of these levels could mean that the Rupee is back to its previous range. HK related spat with China is escalating with UK and Australia engaging in aggressive moves. While there might be no immediate threat to the Rupee, this issue continues to simmer in the background. The corporate earnings season kicked-off with TCS announcing a 14% fall in profits YoY – lower than consensus. There is a clear deceleration in segments such as Retail and more importantly their India demand contracted by 27%. In the next few weeks, the economic reality as evidenced by corporate earnings could keep the Rupee in check and can potentially cause some risk aversion. For now, INR is still well balanced, but the medium-term bias continues to be towards more depreciation, albeit within a range.

USD INR view today (09/07/2020)

INR is likely to open around 74.90. To get the USDINR View Daily via WhatsApp Register here. Some of India’s largest companies use our USDINR views. You can also Email us to setup a 121 discussion on USDINR Hedge Strategies for your organization or to get detailed USDINR View.

The Rupee reversed some of its recent gains and traded 75 briefly yesterday as risk aversion returned to Indian markets. Indian equities were down 1%, tracking the previous day’s US market fall. Overnight NY session, though, saw equities stabilize and USD weaken even as the number of new cases in the US surged to all-time highs. EUR is back above 1.1325, USDJPY lower at 107.25, and the Dollar index is below 96.50.

The worldwide Coronavirus cases jumped 213k yesterday, with the US reporting a rise of 61.5k cases. The four hotspot states – California, Texas, Florida, and Arizona continue to report record jumps in cases and hospitalizations, but relatively fewer deaths than what NY reported at a comparable juncture. The daily death count is now at 850+ in the US for the past couple of days. One has to wait to see if this is a trend or just due to the backlog of cases from the 4th of July weekend. In the previous phase of the virus in the US and EU countries, deaths lagged cases by around 5 to 11 days, and we are way past that period in this phase. It does seem that most cases being found now are milder and in the younger population, leading to lower mortality.

India reported 25k new cases, but just 6k additional active cases yesterday. The fatality count remains within the 450-500 range. Anecdotal news reports suggest that the symptoms due to the disease have gotten milder, and the need for hospitalizations has reduced in most cases. Going by the ICMR serosurvey results of last month, assuming a 0.08% mortality rate, there could be 2.6 crore infections already in the country. But, India is significantly away from achieving any sort of herd immunity. The behavior of the virus in the EU countries and the US suggests, that the pandemic slows down drastically at around 20% infection rate, and India could be just at a 2% infection rate. In the hotspot states/cities, the infection rate is much higher but could be less than 10% still. For instance, if we assume 0.08% mortality, around 1.2 crore infections should be prevalent in Maharashtra which represents 10% of the population. By this estimation, India still has some to go before the curve would flatten.

INR is in a range, and evenly balanced. The downward momentum of USDINR has now stalled, but global headlines are not threatening enough to push the currency pair back above 75.20 yet. Markets seem to play between concern and hope on alternate days, with the bulls looking at lower mortality rate, while the bears worry that the surging cases would eventually overwhelm the system. The China-US spat is on a slow boil and could eventually erupt, but not in the immediate term. INR could continue to move around in the new range for a few more days.

USD INR view today (08/07/2020)

INR is likely to open around 74.80/90. To get the USDINR View Daily via WhatsApp Register here. Some of India’s largest companies use our USDINR views. You can also Email us to setup a 121 discussion on USDINR Hedge Strategies for your organization or to get detailed USDINR View.

The Dollar gained on the back of concerns around the virus spread in the US yesterday. The Dollar Index is closing in on 97, EUR fell to 1.1270 from above 1.13. USDJPY is slightly higher at 107.65. While Indian equities were positive, with a 0.5% gain, US equities fell more than 1% as the number of cases in the US surged along with an increase in deaths.

Coronavirus cases worldwide urged 205k yesterday, with the US and Brazil being the top two contributors. The US reported close to 1000 fatalities, highest in a month. ICU capacities in Texas and Florida are reported to be full. The sharp rise in fatalities is of concern, and we have to watch whether this is the start of a pattern or if it is a one-off. India’s virus trend is intact, with around 6.k odd active cases and 450 deaths reported yesterday. The mortality count is not picking up pace in India despite a continued increase in cases, which is positive from the perspective of government policy. But, hot spot cities and other metros continue to see community transmission, affecting customer behavior and spending. While the focus is on easing of lockdown restrictions and reviving the economy, markets are ignoring the long-term damage to the economy due to a fearful consumer, as discretionary spending could collapse and hurt large parts of the economy.

USDINR momentum has stalled, and INR is now in balance. In addition to the virus spread, markets would also be focussed on the next US action related to the Hong Kong situation. News reports yesterday suggested that the US is looking at banning the TikTok app, and also that the Trump administration discussed ways of destabilizing the Hong Kong Dollar currency peg. While markets continue to shrug off this escalation, for now, the risk of a flare-up in China-US tensions is real. INR is in a neutral zone now, and the next week would be critical as both virus fatality trends and HK related developments would solidify over the period.

USD INR view today (07/07/2020)

INR is likely to open around 74.60. To get the USDINR View Daily via WhatsApp Register here. Some of India’s largest companies use our USDINR views. You can also Email us to setup a 121 discussion on USDINR Hedge Strategies for your organization or to get detailed USDINR View.

The Dollar fell against most currencies yesterday, on the back of strong risk appetite. Equity markets across the world continued their merry way, with the major indices seeing gaining close to 1.5%. EUR has jumped to 1.13+, supported by strong June EU retail sales data, and relatively lower incidence of a second virus wave. JPY strengthened to 107.30. INR was in a range but showed mild depreciation bias despite the news that India and China agreed to create a 1 KM buffer zone around the LAC and retreat further inside.

Coronavirus cases worldwide were slightly lower at 170k, due to the Sunday lag effect. The US continues to register 50k odd cases daily, but the mortality rate has been remarkably low relative to the surge in cases. Further, states such as NY have been able to flatten the curve despite the concerns around protests leading to a second surge. The infection behavior in NY and EU countries such as Italy and Spain lends credence to the theory that once around 20% of the population has antibodies, the virus significantly slows down probably due to the fact that large proportion of the population already has immunity to this virus through interaction with other Coronavirus types.

India reported 22.5k cases yesterday, and active cases grew by 7k. Over the last few days, active growth has been in check despite the surge in new cases. Further, the mortality rate has been contained, with a growth rate of less than 2.5%. A negative aspect, though, is that the infection has many more days to go before one can see a peak since the positive test ratio continues to be high. Maharashtra and Telangana have this ratio at 25%, while Tamilnadu, Delhi, Karnataka, and Gujarat report this figure at 10%. As the pace of testing increases, one can expect the daily caseload to jump even more in the coming month or two. But, it also seems that increased testing is picking up relatively milder cases, bringing the overall mortality rate down. Case Fatality Rate, which used to be upwards of 3.5% has fallen to less than 3%. From the markets’ perspective, as long as there are no surprises on this front, they would ignore the daily trends in the virus data provided reopening plans are not affected.

INR has settled into a narrow range around 74.50-80. While economic data across the globe point to some recovery from the depths of losses in May, late June and July saw the resurgence of the second phase. The economic data could provide a reality check to markets in a month or so. Corporate earnings season would kick off soon, providing another doorway into the reality of the real economy. While equities have been on a liquidity-induced rampage, a risk of pullback exists and hence INR’s medium-term outlook is uncertain. But, over the next few days, the Rupee has no large threats to its stability.

USD INR view today (06/07/2020)

INR is likely to open around 74.60/70. To get the USDINR View Daily via WhatsApp Register here. Some of India’s largest companies use our USDINR views. You can also Email us to setup a 121 discussion on USDINR Hedge Strategies for your organization or to get detailed USDINR View.

The Dollar is slightly weaker and the Dollar Index is approaching the 97 mark. Asian equity markets have opened positive and US equity futures are higher, despite concerns of rising infections. EUR is at 1.1260 and USDJPY at 107.70. INR has been flat for two days after the sharp move which broke the previous range.

The reported Coronavirus cases worldwide slowed down yesterday due to the weekend effect. While the US continues to record 45k cases a day, the number of fatalities has sharply fallen, to a range of 250-300 per day. India reported a record 24k cases yesterday, but the active case growth continues to hover around 6-8k per day. Case Fatality Rate has fallen to less than 3% now, as the headline infection number surged in proportion to the tests conducted. A positive sign is that the expected sharp increase in fatalities is yet to be seen, with the overall mortality rate falling both in India and the US. The rate of infection, though, is surging in both countries. India’s positive test ratio is nearing 10% and has been consistently rising with the number of tests. This ratio has to fall significantly before a peak can be reached in active case curve.

This week has ISM services data and US CPI along with India IIP data. INR has behaved in a docile fashion after the surge towards 74.75. The probable short-term direction for USDINR is down, given the momentum. But, macro factors don’t bode well for the currency over the medium-term. Expectations of a quick economic revival are being dashed by the day, and it is a matter of time before some parts of financial markets reset expectations around economic growth. Corporate earnings for the last quarter would now be critical for markets, to gauge whether there are any signs of revival at all. For now, though, INR is in a safe zone.

USD INR view today (03/07/2020)

INR is likely to open around 74.75. To get the USDINR View Daily via WhatsApp Register here. Some of India’s largest companies use our USDINR views. You can also Email us to setup a 121 discussion on USDINR Hedge Strategies for your organization or to get detailed USDINR View.

The Rupee had one of the biggest days of strength yesterday, with a totally unexpected 80+ paise move. USD remains mildly weak, with USD index at 97.20 and EUR at 1.1240. The entire USDINR move is clearly due to India-specific reasons. The global backdrop has turned fairly benign despite rising COVID cases, as macro data out of the US continues to surprise on the upside. The US jobs data showed a 4.8 million+ job additions, and the unemployment rate fell to 11.1%.

The sharp move in INR was unexpected and probably happened due to the RBI stepping away from the market. Given that the current range has been holding for months, significant stops were built around the lower end of the range at 75.40 levels, and with RBI out, the entire market would have been stopped out even with marginal inflows. This move lends more credence to our view that RBI is also watching the FX impact on their reserves. We wonder that since 30th June is their balance sheet closing date, would they have let go of USDINR in the new financial year. The medium-term uncertainty for the Rupee has not changed with this move, but the sheer momentum can take USDINR further lower to 74 levels. Today is very critical to gauge whether the momentum reverses or carries INR even stronger.

Coronavirus cases worldwide jumped more than 200k yesterday and the US is reaching close to 60k additional cases per day. The number of deaths is still on the lower side but has consistently been in the 600-700 range. India reported the highest ever cases yesterday – close to 22k, but the recoveries also surged resulting in active case growth of just 2k. Fatalities also fell to 380 yesterday. Despite the surging headline number, mortality numbers give hope that India can continue to open up economic activity despite the virus, contributing to positivity in equity markets also.

INR has broken the range convincingly to the downside and hence from a technical perspective, the 75.20-40 range becomes a strong resistance for any reversal. The next few days would determine whether 74 would also be breached. For now, the bias remains to the downside for USDINR.

USD INR view today (02/07/2020)

INR is likely to open around 75.50. To get the USDINR View Daily via WhatsApp Register here. Some of India’s largest companies use our USDINR views. You can also Email us to setup a 121 discussion on USDINR Hedge Strategies for your organization or to get detailed USDINR View.

The Dollar was mildly weaker, with the Dollar Index trading at 97.20, EUR at 1.1250, and JPY at 107.50. US markets had a positive day despite surging cases due to Pfizer’s announcement that one experimental vaccine has produced a robust antibody response on all the test subjects. US ISM data for May surged, but the market shrugged off the data given that more US states are moving back towards heavier lockdown restrictions anyway. ADP payroll data came in lower than expected, but the May number got revised upwards by 6 million. Indian equities also had a solid day with almost a 1.5% surge in the main indices.

Coronavirus worldwide surged 195k yesterday, the highest ever jump. The US reported more than 51k cases yesterday, again the highest ever. The trend is now clear that a large surge is underway in the US. The number of deaths has also ticked up higher in some states such as Texas, but the overall fatality count is still way below the previous peak and is unlikely to reach such numbers anytime soon. The lower mortality rate in the US is a direct result of a large testing effort and a higher proportion of the infection in the younger population. California has walked back some opening-up steps and has again barred restaurants and such businesses in most counties. In another week, if the hospitalization count does not decrease, one can expect more stringent lockdowns in most US states. Brazil continues the trend of 40k+ cases and 1000 deaths and the peak of the infection curve is nowhere in sight for the country.

India reported 19k new cases and 7k active cases yesterday and the fatality count remained around 450. Similar to the US, India also has seen mortality figures stabilize in spite of rising infection count, probably as testing has picked up sharply bringing out milder cases. All the hotspot states have retained their respective trends yesterday, and the positive test ratio is still adamant at 9-10% for the country as a whole. Going by this ratio across states, it is unlikely that the peak would be reached by July. In the US and EU, the peak was achieved when the positive test ratio came down below 4-5% mark so that the active case growth could overshadow new infections.

The last paragraph of this update has also become sticky, imitating INR. We can just replace yesterday’s language today and it would be valid. INR range has been extremely stable, as positives and negatives balance each other out. While there are signs of escalation in the India-China situation, it is not yet bothering markets. For now, INR has no real incentive to move out of the range in either direction.

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USD INR view today (01/07/2020)

INR is likely to open around 75.50/60. To get the USDINR View Daily via WhatsApp Register here. Some of India’s largest companies use our USDINR views. You can also Email us to setup a 121 discussion on USDINR Hedge Strategies for your organization or to get detailed USDINR View.

The Dollar is flat against most currencies though US equities surged more than 1%. The dollar index continues to trade around 97.40. EUR is at 1.1230 and USDJPY is higher at 108.30. Indian markets traded flat yesterday, even as worries about potential escalation at China border resurfaced yesterday on news that the Indian Army is moving tanks to the border. Any further escalation on this front could lead to some risk aversion in the markets.

Coronavirus cases worldwide jumped 175k yesterday, with the US reporting 45k cases. Brazil reported 1300 deaths, reversing the trend of recent decreases. The US also reported higher deaths at 700+. The next week is very critical to ascertain whether there would be a surge in fatalities in the US due to the lag effect of the sharp rise in cases that started around 10 days ago. India has been reporting around 18k new cases and 6k odd active cases. States like Maharashtra, Delhi, and Tamilnadu are showing signs of stability in new cases and fatalities, while other states such as Telangana are slowly picking up more cases. While the government is moving ahead with Unlocking phases, individual states are thinking about more restrictions in hot spots. Chennai has been in lockdown over the last two weeks, and it seems Hyderabad might also be going into a full lockdown in the next 3-4 days. Even without such measures, the fact remains that the economy is in a deep recession and the unemployment rate could become more permanent, as job intensive sectors like travel and hospitality see no light at the end of the tunnel.

The Rupee is extremely sticky in its range. The current account turned to surplus for Q1 of 2020 despite a 10 billion monthly trade deficit during that period. Given that the trade deficit crashed post-Covid, one can expect the surplus to continue into the Q1 of this financial year even after accounting for a potential drop in Invisibles. Hence INR is a safe zone as far as the structural demand-supply situation is concerned. Given that the global backdrop does not seem to indicate any unexpected headlines, INR can be expected to grind in the current range for few more days, unless the China border situation flares up substantially.

USD INR view today (30/06/2020)

INR is likely to open around 75.50. To get the USDINR View Daily via WhatsApp Register here. Some of India’s largest companies use our USDINR views. You can also Email us to setup a 121 discussion on USDINR Hedge Strategies for your organization or to get detailed USDINR View.

While US equities had a good day yesterday, with 2%+ move on the DOW, currencies were fairly flat. EUR is at 1.1240, while JPY weakened mildly to trade at 107.70. Indian markets were down 0.6% following Friday’s risk aversion in US markets.

Coronavirus cases worldwide jumped by 160k yesterday, led by a 45k rise in the US. Despite the sharp surge in cases, the daily rise in fatalities is on a slowing trend in the US, with the latest being 340 deaths (at the peak it was 2500 deaths a day). But, the US states hit by the second wave are moving towards more broad-based lockdowns, the latest being a ban on bars, indoor gyms, etc. in Arizona. While the US equities were up yesterday, more such lockdown announcements would leave a bad taste for the markets.

India continues to report around 5k-8k additional active cases a day, while the headline daily growth number remains around 18k-20k. More importantly, the daily deaths have been around 400 level for more than 3 weeks now, which is a positive sign. Two broad observations can be made looking at the data on the positive test ratio and mortality rate in India. First, the high positive test ratio (8-10%) indicates that the infection is deep in the community, at least in the big cities, and the reported cases are of no real analytical value as they can rise as a proportion of tests done. The second observation is that a manageable rise in deaths implies that the true mortality rate of the disease is much lower than feared. The latest news on ICMR serosurvey results assess that 14% of Kolkata’s population seems to already have the antibodies to the infection. If the true infection scale is anywhere close to this figure, the mortality rate of the disease would fall to 0.02% which is much lower than even seasonal flu (0.1% mortality rate). In this backdrop, the government response could aim at managing the health care system rather than thinking about more lockdowns.

INR has been exceptionally range-bound over the past 2 months. While potential risk factors such as US-China spat, and India-China tensions, along with the ongoing COVID scare can threaten the status quo, none of these factors have escalated enough to make for a serious threat. The US is moving ahead with removing special treatment to Hong Kong as China prepares to sign the national security law this week. Markets have largely ignored yesterday’s announcements regarding this aspect, as they don’t see this confrontation percolating into the trade deal. India yesterday banned 50 odd Chinese apps including Tiktok. While it remains to be seen if China sees this as a part of India’s border strategy, markets might not react much to this news at this stage. Some important economic data points such as ISM, US jobs report are due this week. Though unlikely, we have to wait and see if one of these data releases would throw a surprise and cause a sharp move in INR.

USD INR view today (29/06/2020)

INR is likely to open around 75.60/70. To get the USDINR View Daily via WhatsApp Register here. Some of India’s largest companies use our USDINR views. You can also Email us to setup a 121 discussion on USDINR Hedge Strategies for your organization or to get detailed USDINR View.

Dollar held firm on Friday as concerns about rising infections brought down US equities by more than 2.5%. Indian equities held well with gains of 1%, but the situation turned in the US hours, as cases continued to surge. EUR is at 1.1220, USDJPY is at 107.20. The Dollar index is trading at 97.40.

Coronavirus cases worldwide surged by 160k yesterday, despite the weekend effect. Friday saw close to 190k cases, and one can expect a similar trend again during the middle of this week. The US is now firmly into a second wave of the virus, as the daily caseload surpasses the previous peaks comfortably. Unlike the previous episode, the case surge is spread across states and is increasing at an alarming rate. But, the mortality rate has plummeted despite the rise in new cases. The average number of daily deaths over the past few days has stayed fairly flat at around 700 a day – 1/3rd of the previous peak. While this divergence could be due to a lag between the case surge and resulting deaths, another reason seems to be that the infected population is now overwhelmingly young. States such as Texas and California are considering a temporary ban on certain segments of the economy such as bars/restaurants to reduce the virus spread. Unlike the previous phase, a total lockdown is unlikely and hence the potential for deeper virus spread is also high. The next two weeks would reveal whether mortality rates also pick up and cause more disruptions to the economy.

India has been reporting around 20k cases a day (4% a day), and active case growth has picked up to 8k cases (close to 4%). The Case Fatality Rate (CFR) stands just around 3%. The number of fatalities has been rising at around 400 a day on average, which is a good sign as the growth rate in mortalities is showing signs of decrease despite the surge in new cases. It is natural that as testing increases, the number of cases would tend towards the true number which is anyway known to be a multiple of the official count, and the mortality rate would decrease significantly. Going by the ICMR antibody test results, which estimated the mortality rate at 0.08%, one can surmise that India has more than 20 million infections already. The top states such as Maharashtra, Delhi, and Tamilnadu continue to contribute a large chunk of cases, but Karnataka and Telangana have been reporting a significant rise in cases post-relaxations. In all, as long as the mortality numbers do not surge, it could be a status quo on the government policy front.

This week is heavy on macro data and events. Markets would focus on US non-farm payroll, ISM, and jobless claims data to gauge the chances of v-shaped recovery. FOMC minutes and Powell’s testimony to US congress are also on the agenda. On the geopolitical front, US-China spat might see fresh escalations as China moves ahead with the new security law in Hongkong this week. India-China border tensions seem to have cooled off, for now, thus providing some solace to INR. Given the global USD strength, INR would continue to be under mild pressure, but not so much that the current range is broken.

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USD INR view today and factors impacting it

USD INR view today (11/07/2020)

INR is likely to open around 75.10/20. To get the USDINR View Daily via WhatsApp Register here. Some of India’s largest companies use our USDINR views. You can also Email us to setup a 121 discussion on USDINR Hedge Strategies for your organization or to get detailed USDINR View.

Friday saw USDINR attempt to move beyond the resistance zone of 75.20/75.30. But, the global backdrop changed from risk aversion to risk-positive sentiment over the course of the NY session on Friday, with US equities registering another 1.5% odd gain and USD giving up some of its gains. Asia has opened firm today, as central bank liquidity push and vaccine hopes continue to Trump virus-related concerns. EUR is above 1.13 and USDJPY is below 107, reflecting USD weakness.

Coronavirus case additions slowed to 195k due to the weekend effect. But, the overall trend continues to be that of surging cases, and low mortality. While fatality numbers are on the lower side relative to the case surge in the US, the death count was moving towards 1000 deaths a day, before being suppressed over the weekend. If deaths per day pick up fast in the next few days, markets might pay some heed to the presence of the virus after all. India has sharply higher reported cases at 29k, and the active case growth has also picked up to the 9-10k range, which is a worrying sign. The mortality count is slowly picking up in absolute numbers but remains at 2.2% growth. Places such as Karnataka and UP have announced partial lockdowns to combat the recent surge.

As we stand – 5 months after the pandemic hit countries outside China – places, where the virus was initially severe, seem to be immune, even after lockdowns are lifted. Antibody tests show that around 20% of populations in the erstwhile hotspots are now immune, but the virus spread has all but halted in these areas. While one can attribute this to higher temperatures and hotter climate, the Indian case proves otherwise. One other possible explanation being put forth is that most populations have a natural immunity to this virus through possibly what is called a T-cell response. The behavior of the virus in Mumbai, Delhi, and Chennai also seems to suggest that at a much lower threshold of infection than initially thought, the pandemic reverses course in terms of new cases and deaths. The good news is that the pandemic might not return to these hotspots once the curve peaks. In another 2 months, other emerging hotspots such as Bangalore and Hyderabad should also eventually stabilize (going by the experience in Mumbai).

The economic damage of the virus is still unmitigated, though. Global growth is expected to crash by 4.5% this year, as per IMF. While equity markets might make merry on the liquidity drug, protracted recession can lead to permanent job losses and a long-drawn demand crash. INR tends to underperform in times of global recession, and in that context we can surmise that the pressure on INR over the medium term would remain. While CNH has sharply appreciated over the past few days, the lack of phase-2 US-China deal could come back to hurt risk sentiment. In the short term, the current level of 75.20-30 might provide some resistance to USDINR and could lead to some stability and potentially some INR appreciation. But, the medium-term remains uncertain.

USD INR view today (10/07/2020)

INR is likely to open around 75.10/15. To get the USDINR View Daily via WhatsApp Register here. Some of India’s largest companies use our USDINR views. You can also Email us to setup a 121 discussion on USDINR Hedge Strategies for your organization or to get detailed USDINR View.

Following an alternating pattern, yesterday was a day of risk aversion in US markets, with the DOW falling around 1.3% and the Dollar strengthening on a broad basis. While Indian equities rose more than 1% yesterday, today might see a subdued move in the Indian equity markets. The Dollar index is again back close to 97. INR is likely to track the Dollar weakness and open weaker.

Yesterday saw another 220k additional coronavirus cases worldwide. The US reported 60k+ cases, and worryingly the number of deaths also spiked to 950+. While the mortality rate is way lower than the previous peak, the fatality count is accelerating. India reported an additional 25.7k cases yesterday – the highest ever, but active case growth remained around 6k and the rise in fatalities continues to be in the 450-500 range. While the overall mortality rate is contained, individual state governments have been engaging in ad hoc targeted lockdowns. While the economic impact of the total lockdown is studied well, the silent demand contraction due to the lockdowns and general lack of consumer confidence is being ignored by markets at present.

As an aside, a paper by 240 scientists urged the WHO to consider the possibility of air-borne transmission of the virus also, in addition to the transmission through surfaces. The paper says that micro-droplets can suspend in the air for hours and continue to carry infectious viral particles. The sheer number of super-spreader events across the world can only be explained by aerosolization of the virus and not by surface to surface contact, as per the paper. The WHO initially said that hospital procedures can produce air-borne virus particles, but there is no evidence of airborne spread in other settings. They later backtracked and announced they would investigate the possibility. If indeed confirmed, this has implications in the way public indoor places such as offices, hospitals, etc. are managed and the risk of spread even when there is no close contact with the infected.

Concerns around the virus are here to stay and hence INR is going to be under pressure for some time to come. Today is critical for the near-term direction of the currency since it is now around the resistance zone of 75-75.20. A convincing break of these levels could mean that the Rupee is back to its previous range. HK related spat with China is escalating with UK and Australia engaging in aggressive moves. While there might be no immediate threat to the Rupee, this issue continues to simmer in the background. The corporate earnings season kicked-off with TCS announcing a 14% fall in profits YoY – lower than consensus. There is a clear deceleration in segments such as Retail and more importantly their India demand contracted by 27%. In the next few weeks, the economic reality as evidenced by corporate earnings could keep the Rupee in check and can potentially cause some risk aversion. For now, INR is still well balanced, but the medium-term bias continues to be towards more depreciation, albeit within a range.

USD INR view today (09/07/2020)

INR is likely to open around 74.90. To get the USDINR View Daily via WhatsApp Register here. Some of India’s largest companies use our USDINR views. You can also Email us to setup a 121 discussion on USDINR Hedge Strategies for your organization or to get detailed USDINR View.

The Rupee reversed some of its recent gains and traded 75 briefly yesterday as risk aversion returned to Indian markets. Indian equities were down 1%, tracking the previous day’s US market fall. Overnight NY session, though, saw equities stabilize and USD weaken even as the number of new cases in the US surged to all-time highs. EUR is back above 1.1325, USDJPY lower at 107.25, and the Dollar index is below 96.50.

The worldwide Coronavirus cases jumped 213k yesterday, with the US reporting a rise of 61.5k cases. The four hotspot states – California, Texas, Florida, and Arizona continue to report record jumps in cases and hospitalizations, but relatively fewer deaths than what NY reported at a comparable juncture. The daily death count is now at 850+ in the US for the past couple of days. One has to wait to see if this is a trend or just due to the backlog of cases from the 4th of July weekend. In the previous phase of the virus in the US and EU countries, deaths lagged cases by around 5 to 11 days, and we are way past that period in this phase. It does seem that most cases being found now are milder and in the younger population, leading to lower mortality.

India reported 25k new cases, but just 6k additional active cases yesterday. The fatality count remains within the 450-500 range. Anecdotal news reports suggest that the symptoms due to the disease have gotten milder, and the need for hospitalizations has reduced in most cases. Going by the ICMR serosurvey results of last month, assuming a 0.08% mortality rate, there could be 2.6 crore infections already in the country. But, India is significantly away from achieving any sort of herd immunity. The behavior of the virus in the EU countries and the US suggests, that the pandemic slows down drastically at around 20% infection rate, and India could be just at a 2% infection rate. In the hotspot states/cities, the infection rate is much higher but could be less than 10% still. For instance, if we assume 0.08% mortality, around 1.2 crore infections should be prevalent in Maharashtra which represents 10% of the population. By this estimation, India still has some to go before the curve would flatten.

INR is in a range, and evenly balanced. The downward momentum of USDINR has now stalled, but global headlines are not threatening enough to push the currency pair back above 75.20 yet. Markets seem to play between concern and hope on alternate days, with the bulls looking at lower mortality rate, while the bears worry that the surging cases would eventually overwhelm the system. The China-US spat is on a slow boil and could eventually erupt, but not in the immediate term. INR could continue to move around in the new range for a few more days.

USD INR view today (08/07/2020)

INR is likely to open around 74.80/90. To get the USDINR View Daily via WhatsApp Register here. Some of India’s largest companies use our USDINR views. You can also Email us to setup a 121 discussion on USDINR Hedge Strategies for your organization or to get detailed USDINR View.

The Dollar gained on the back of concerns around the virus spread in the US yesterday. The Dollar Index is closing in on 97, EUR fell to 1.1270 from above 1.13. USDJPY is slightly higher at 107.65. While Indian equities were positive, with a 0.5% gain, US equities fell more than 1% as the number of cases in the US surged along with an increase in deaths.

Coronavirus cases worldwide urged 205k yesterday, with the US and Brazil being the top two contributors. The US reported close to 1000 fatalities, highest in a month. ICU capacities in Texas and Florida are reported to be full. The sharp rise in fatalities is of concern, and we have to watch whether this is the start of a pattern or if it is a one-off. India’s virus trend is intact, with around 6.k odd active cases and 450 deaths reported yesterday. The mortality count is not picking up pace in India despite a continued increase in cases, which is positive from the perspective of government policy. But, hot spot cities and other metros continue to see community transmission, affecting customer behavior and spending. While the focus is on easing of lockdown restrictions and reviving the economy, markets are ignoring the long-term damage to the economy due to a fearful consumer, as discretionary spending could collapse and hurt large parts of the economy.

USDINR momentum has stalled, and INR is now in balance. In addition to the virus spread, markets would also be focussed on the next US action related to the Hong Kong situation. News reports yesterday suggested that the US is looking at banning the TikTok app, and also that the Trump administration discussed ways of destabilizing the Hong Kong Dollar currency peg. While markets continue to shrug off this escalation, for now, the risk of a flare-up in China-US tensions is real. INR is in a neutral zone now, and the next week would be critical as both virus fatality trends and HK related developments would solidify over the period.

USD INR view today (07/07/2020)

INR is likely to open around 74.60. To get the USDINR View Daily via WhatsApp Register here. Some of India’s largest companies use our USDINR views. You can also Email us to setup a 121 discussion on USDINR Hedge Strategies for your organization or to get detailed USDINR View.

The Dollar fell against most currencies yesterday, on the back of strong risk appetite. Equity markets across the world continued their merry way, with the major indices seeing gaining close to 1.5%. EUR has jumped to 1.13+, supported by strong June EU retail sales data, and relatively lower incidence of a second virus wave. JPY strengthened to 107.30. INR was in a range but showed mild depreciation bias despite the news that India and China agreed to create a 1 KM buffer zone around the LAC and retreat further inside.

Coronavirus cases worldwide were slightly lower at 170k, due to the Sunday lag effect. The US continues to register 50k odd cases daily, but the mortality rate has been remarkably low relative to the surge in cases. Further, states such as NY have been able to flatten the curve despite the concerns around protests leading to a second surge. The infection behavior in NY and EU countries such as Italy and Spain lends credence to the theory that once around 20% of the population has antibodies, the virus significantly slows down probably due to the fact that large proportion of the population already has immunity to this virus through interaction with other Coronavirus types.

India reported 22.5k cases yesterday, and active cases grew by 7k. Over the last few days, active growth has been in check despite the surge in new cases. Further, the mortality rate has been contained, with a growth rate of less than 2.5%. A negative aspect, though, is that the infection has many more days to go before one can see a peak since the positive test ratio continues to be high. Maharashtra and Telangana have this ratio at 25%, while Tamilnadu, Delhi, Karnataka, and Gujarat report this figure at 10%. As the pace of testing increases, one can expect the daily caseload to jump even more in the coming month or two. But, it also seems that increased testing is picking up relatively milder cases, bringing the overall mortality rate down. Case Fatality Rate, which used to be upwards of 3.5% has fallen to less than 3%. From the markets’ perspective, as long as there are no surprises on this front, they would ignore the daily trends in the virus data provided reopening plans are not affected.

INR has settled into a narrow range around 74.50-80. While economic data across the globe point to some recovery from the depths of losses in May, late June and July saw the resurgence of the second phase. The economic data could provide a reality check to markets in a month or so. Corporate earnings season would kick off soon, providing another doorway into the reality of the real economy. While equities have been on a liquidity-induced rampage, a risk of pullback exists and hence INR’s medium-term outlook is uncertain. But, over the next few days, the Rupee has no large threats to its stability.

USD INR view today (06/07/2020)

INR is likely to open around 74.60/70. To get the USDINR View Daily via WhatsApp Register here. Some of India’s largest companies use our USDINR views. You can also Email us to setup a 121 discussion on USDINR Hedge Strategies for your organization or to get detailed USDINR View.

The Dollar is slightly weaker and the Dollar Index is approaching the 97 mark. Asian equity markets have opened positive and US equity futures are higher, despite concerns of rising infections. EUR is at 1.1260 and USDJPY at 107.70. INR has been flat for two days after the sharp move which broke the previous range.

The reported Coronavirus cases worldwide slowed down yesterday due to the weekend effect. While the US continues to record 45k cases a day, the number of fatalities has sharply fallen, to a range of 250-300 per day. India reported a record 24k cases yesterday, but the active case growth continues to hover around 6-8k per day. Case Fatality Rate has fallen to less than 3% now, as the headline infection number surged in proportion to the tests conducted. A positive sign is that the expected sharp increase in fatalities is yet to be seen, with the overall mortality rate falling both in India and the US. The rate of infection, though, is surging in both countries. India’s positive test ratio is nearing 10% and has been consistently rising with the number of tests. This ratio has to fall significantly before a peak can be reached in active case curve.

This week has ISM services data and US CPI along with India IIP data. INR has behaved in a docile fashion after the surge towards 74.75. The probable short-term direction for USDINR is down, given the momentum. But, macro factors don’t bode well for the currency over the medium-term. Expectations of a quick economic revival are being dashed by the day, and it is a matter of time before some parts of financial markets reset expectations around economic growth. Corporate earnings for the last quarter would now be critical for markets, to gauge whether there are any signs of revival at all. For now, though, INR is in a safe zone.

USD INR view today (03/07/2020)

INR is likely to open around 74.75. To get the USDINR View Daily via WhatsApp Register here. Some of India’s largest companies use our USDINR views. You can also Email us to setup a 121 discussion on USDINR Hedge Strategies for your organization or to get detailed USDINR View.

The Rupee had one of the biggest days of strength yesterday, with a totally unexpected 80+ paise move. USD remains mildly weak, with USD index at 97.20 and EUR at 1.1240. The entire USDINR move is clearly due to India-specific reasons. The global backdrop has turned fairly benign despite rising COVID cases, as macro data out of the US continues to surprise on the upside. The US jobs data showed a 4.8 million+ job additions, and the unemployment rate fell to 11.1%.

The sharp move in INR was unexpected and probably happened due to the RBI stepping away from the market. Given that the current range has been holding for months, significant stops were built around the lower end of the range at 75.40 levels, and with RBI out, the entire market would have been stopped out even with marginal inflows. This move lends more credence to our view that RBI is also watching the FX impact on their reserves. We wonder that since 30th June is their balance sheet closing date, would they have let go of USDINR in the new financial year. The medium-term uncertainty for the Rupee has not changed with this move, but the sheer momentum can take USDINR further lower to 74 levels. Today is very critical to gauge whether the momentum reverses or carries INR even stronger.

Coronavirus cases worldwide jumped more than 200k yesterday and the US is reaching close to 60k additional cases per day. The number of deaths is still on the lower side but has consistently been in the 600-700 range. India reported the highest ever cases yesterday – close to 22k, but the recoveries also surged resulting in active case growth of just 2k. Fatalities also fell to 380 yesterday. Despite the surging headline number, mortality numbers give hope that India can continue to open up economic activity despite the virus, contributing to positivity in equity markets also.

INR has broken the range convincingly to the downside and hence from a technical perspective, the 75.20-40 range becomes a strong resistance for any reversal. The next few days would determine whether 74 would also be breached. For now, the bias remains to the downside for USDINR.

USD INR view today (02/07/2020)

INR is likely to open around 75.50. To get the USDINR View Daily via WhatsApp Register here. Some of India’s largest companies use our USDINR views. You can also Email us to setup a 121 discussion on USDINR Hedge Strategies for your organization or to get detailed USDINR View.

The Dollar was mildly weaker, with the Dollar Index trading at 97.20, EUR at 1.1250, and JPY at 107.50. US markets had a positive day despite surging cases due to Pfizer’s announcement that one experimental vaccine has produced a robust antibody response on all the test subjects. US ISM data for May surged, but the market shrugged off the data given that more US states are moving back towards heavier lockdown restrictions anyway. ADP payroll data came in lower than expected, but the May number got revised upwards by 6 million. Indian equities also had a solid day with almost a 1.5% surge in the main indices.

Coronavirus worldwide surged 195k yesterday, the highest ever jump. The US reported more than 51k cases yesterday, again the highest ever. The trend is now clear that a large surge is underway in the US. The number of deaths has also ticked up higher in some states such as Texas, but the overall fatality count is still way below the previous peak and is unlikely to reach such numbers anytime soon. The lower mortality rate in the US is a direct result of a large testing effort and a higher proportion of the infection in the younger population. California has walked back some opening-up steps and has again barred restaurants and such businesses in most counties. In another week, if the hospitalization count does not decrease, one can expect more stringent lockdowns in most US states. Brazil continues the trend of 40k+ cases and 1000 deaths and the peak of the infection curve is nowhere in sight for the country.

India reported 19k new cases and 7k active cases yesterday and the fatality count remained around 450. Similar to the US, India also has seen mortality figures stabilize in spite of rising infection count, probably as testing has picked up sharply bringing out milder cases. All the hotspot states have retained their respective trends yesterday, and the positive test ratio is still adamant at 9-10% for the country as a whole. Going by this ratio across states, it is unlikely that the peak would be reached by July. In the US and EU, the peak was achieved when the positive test ratio came down below 4-5% mark so that the active case growth could overshadow new infections.

The last paragraph of this update has also become sticky, imitating INR. We can just replace yesterday’s language today and it would be valid. INR range has been extremely stable, as positives and negatives balance each other out. While there are signs of escalation in the India-China situation, it is not yet bothering markets. For now, INR has no real incentive to move out of the range in either direction.

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USD INR view today (01/07/2020)

INR is likely to open around 75.50/60. To get the USDINR View Daily via WhatsApp Register here. Some of India’s largest companies use our USDINR views. You can also Email us to setup a 121 discussion on USDINR Hedge Strategies for your organization or to get detailed USDINR View.

The Dollar is flat against most currencies though US equities surged more than 1%. The dollar index continues to trade around 97.40. EUR is at 1.1230 and USDJPY is higher at 108.30. Indian markets traded flat yesterday, even as worries about potential escalation at China border resurfaced yesterday on news that the Indian Army is moving tanks to the border. Any further escalation on this front could lead to some risk aversion in the markets.

Coronavirus cases worldwide jumped 175k yesterday, with the US reporting 45k cases. Brazil reported 1300 deaths, reversing the trend of recent decreases. The US also reported higher deaths at 700+. The next week is very critical to ascertain whether there would be a surge in fatalities in the US due to the lag effect of the sharp rise in cases that started around 10 days ago. India has been reporting around 18k new cases and 6k odd active cases. States like Maharashtra, Delhi, and Tamilnadu are showing signs of stability in new cases and fatalities, while other states such as Telangana are slowly picking up more cases. While the government is moving ahead with Unlocking phases, individual states are thinking about more restrictions in hot spots. Chennai has been in lockdown over the last two weeks, and it seems Hyderabad might also be going into a full lockdown in the next 3-4 days. Even without such measures, the fact remains that the economy is in a deep recession and the unemployment rate could become more permanent, as job intensive sectors like travel and hospitality see no light at the end of the tunnel.

The Rupee is extremely sticky in its range. The current account turned to surplus for Q1 of 2020 despite a 10 billion monthly trade deficit during that period. Given that the trade deficit crashed post-Covid, one can expect the surplus to continue into the Q1 of this financial year even after accounting for a potential drop in Invisibles. Hence INR is a safe zone as far as the structural demand-supply situation is concerned. Given that the global backdrop does not seem to indicate any unexpected headlines, INR can be expected to grind in the current range for few more days, unless the China border situation flares up substantially.

USD INR view today (30/06/2020)

INR is likely to open around 75.50. To get the USDINR View Daily via WhatsApp Register here. Some of India’s largest companies use our USDINR views. You can also Email us to setup a 121 discussion on USDINR Hedge Strategies for your organization or to get detailed USDINR View.

While US equities had a good day yesterday, with 2%+ move on the DOW, currencies were fairly flat. EUR is at 1.1240, while JPY weakened mildly to trade at 107.70. Indian markets were down 0.6% following Friday’s risk aversion in US markets.

Coronavirus cases worldwide jumped by 160k yesterday, led by a 45k rise in the US. Despite the sharp surge in cases, the daily rise in fatalities is on a slowing trend in the US, with the latest being 340 deaths (at the peak it was 2500 deaths a day). But, the US states hit by the second wave are moving towards more broad-based lockdowns, the latest being a ban on bars, indoor gyms, etc. in Arizona. While the US equities were up yesterday, more such lockdown announcements would leave a bad taste for the markets.

India continues to report around 5k-8k additional active cases a day, while the headline daily growth number remains around 18k-20k. More importantly, the daily deaths have been around 400 level for more than 3 weeks now, which is a positive sign. Two broad observations can be made looking at the data on the positive test ratio and mortality rate in India. First, the high positive test ratio (8-10%) indicates that the infection is deep in the community, at least in the big cities, and the reported cases are of no real analytical value as they can rise as a proportion of tests done. The second observation is that a manageable rise in deaths implies that the true mortality rate of the disease is much lower than feared. The latest news on ICMR serosurvey results assess that 14% of Kolkata’s population seems to already have the antibodies to the infection. If the true infection scale is anywhere close to this figure, the mortality rate of the disease would fall to 0.02% which is much lower than even seasonal flu (0.1% mortality rate). In this backdrop, the government response could aim at managing the health care system rather than thinking about more lockdowns.

INR has been exceptionally range-bound over the past 2 months. While potential risk factors such as US-China spat, and India-China tensions, along with the ongoing COVID scare can threaten the status quo, none of these factors have escalated enough to make for a serious threat. The US is moving ahead with removing special treatment to Hong Kong as China prepares to sign the national security law this week. Markets have largely ignored yesterday’s announcements regarding this aspect, as they don’t see this confrontation percolating into the trade deal. India yesterday banned 50 odd Chinese apps including Tiktok. While it remains to be seen if China sees this as a part of India’s border strategy, markets might not react much to this news at this stage. Some important economic data points such as ISM, US jobs report are due this week. Though unlikely, we have to wait and see if one of these data releases would throw a surprise and cause a sharp move in INR.

USD INR view today (29/06/2020)

INR is likely to open around 75.60/70. To get the USDINR View Daily via WhatsApp Register here. Some of India’s largest companies use our USDINR views. You can also Email us to setup a 121 discussion on USDINR Hedge Strategies for your organization or to get detailed USDINR View.

Dollar held firm on Friday as concerns about rising infections brought down US equities by more than 2.5%. Indian equities held well with gains of 1%, but the situation turned in the US hours, as cases continued to surge. EUR is at 1.1220, USDJPY is at 107.20. The Dollar index is trading at 97.40.

Coronavirus cases worldwide surged by 160k yesterday, despite the weekend effect. Friday saw close to 190k cases, and one can expect a similar trend again during the middle of this week. The US is now firmly into a second wave of the virus, as the daily caseload surpasses the previous peaks comfortably. Unlike the previous episode, the case surge is spread across states and is increasing at an alarming rate. But, the mortality rate has plummeted despite the rise in new cases. The average number of daily deaths over the past few days has stayed fairly flat at around 700 a day – 1/3rd of the previous peak. While this divergence could be due to a lag between the case surge and resulting deaths, another reason seems to be that the infected population is now overwhelmingly young. States such as Texas and California are considering a temporary ban on certain segments of the economy such as bars/restaurants to reduce the virus spread. Unlike the previous phase, a total lockdown is unlikely and hence the potential for deeper virus spread is also high. The next two weeks would reveal whether mortality rates also pick up and cause more disruptions to the economy.

India has been reporting around 20k cases a day (4% a day), and active case growth has picked up to 8k cases (close to 4%). The Case Fatality Rate (CFR) stands just around 3%. The number of fatalities has been rising at around 400 a day on average, which is a good sign as the growth rate in mortalities is showing signs of decrease despite the surge in new cases. It is natural that as testing increases, the number of cases would tend towards the true number which is anyway known to be a multiple of the official count, and the mortality rate would decrease significantly. Going by the ICMR antibody test results, which estimated the mortality rate at 0.08%, one can surmise that India has more than 20 million infections already. The top states such as Maharashtra, Delhi, and Tamilnadu continue to contribute a large chunk of cases, but Karnataka and Telangana have been reporting a significant rise in cases post-relaxations. In all, as long as the mortality numbers do not surge, it could be a status quo on the government policy front.

This week is heavy on macro data and events. Markets would focus on US non-farm payroll, ISM, and jobless claims data to gauge the chances of v-shaped recovery. FOMC minutes and Powell’s testimony to US congress are also on the agenda. On the geopolitical front, US-China spat might see fresh escalations as China moves ahead with the new security law in Hongkong this week. India-China border tensions seem to have cooled off, for now, thus providing some solace to INR. Given the global USD strength, INR would continue to be under mild pressure, but not so much that the current range is broken.

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