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Daily Morning Update :Global market and USDINR

Written by QuantArt Market

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USD INR views today (24/11/2020) around 8:00 am

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INR likely to open around 74.20

The Dollar is slightly weaker, with EUR at 1.1840 and DXY above 92.50. Indian equities gained 0.4% yesterday, with Sensex breaching 44,000. US markets rallied yet another 1%, happy about the AstraZeneca vaccine news and on reports that Janet Yellen could be the next treasury secretary of the US. The infection-related news is being overcome by continuing optimism on vaccines and stimulus hopes.

The global wave of infections continues unabated despite all the lockdowns, though the pace of growth has slowed in the EU, indicating a peak. But, with the bulk of the flu season left in the EU and the US, whether mere lockdowns would prevent an escalation in mortality is a moot question. Indian numbers seem to be again falling as Delhi and Kerala seem to be reaching a plateau. The positive test ratio remains around the 4-4.5% mark and until the ratio falls to below 2%, one cannot conclude that this wave of infection is over in India.

INR could remain range-bound for few more days at least since continuing risk appetite in markets offsets the virus and lockdown concerns. The new range of 74 and 75 seems to be holding well, and there is no trigger apparent, that could move the Rupee out of the range in the next few days.

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USD INR views today (23/11/2020) around 8:00 am

 

INR Likely to open around 74.10-74.15 and Sensex likely to trade above 44,000 today. 

The market is caught between the widening spread of coronavirus and the positivity of quick vaccination. Pfizer filed for emergency use and one FDA authority mentioned that the vaccine may come within 3 weeks. 

Weekend numbers of coronavirus infections in the US and Europe are inaccurate but comparing weekend to weekend,  it appears there is no break in the speed of virus spread as of now. Even hospitalization is increasing in the US and Europe.  

India has seen over USD 6 bn. of FPI inflow during November so far which is the highest in any month of 2020. RBI’s Fx reserve scaled a new peak of USD 573 bn as of 13th November. 

A good possibility is that USDINR will see range-bound moves in the next few months instead of any sharp trending on one side. Strategies for range bound markets are standard buy low, sell high and we need to see that after including the forward premium. 

USD INR views today (20/11/2020) around 8:00 am

INR likely to open around 74.10/20

The Rupee recovered yesterday, as the dollar weakness persisted despite concerns about ongoing lockdowns. Renewed hopes of fresh stimulus talks kept equities afloat in the US. USD is slightly lower compared to yesterday, with the DXY at 92.30 and EUR at 1.1870. INR is taking advantage of the general Dollar weakness and is close to the lower end of the current range.

New infections across the world jumped by 630k, with the US reporting 180k. Deaths per day have increased consistently now, though the cases per day have been seeing a plateau around the 625k mark. The US reported 2000 deaths yesterday. California has tightened restrictions with a curfew during the night, added to the rules. US jobless claims came in higher than expected as the lockdown measures have started to take effect. India reported 46k new cases and 580 deaths for yesterday. The numbers are slowly inching up for the country as a whole and the incremental positive test ratio is now above 4%, primarily due to Delhi and a couple of other states such as Maharashtra, Kerala, and West Bengal. India is unlikely to move to a lockdown like the US, but the risk of a new wave in December is still tangible enough. Indian GDP is expected to fall lesser than originally thought, as per Moody’s and other bank forecasts.

US election outcome remains a dark horse, though a reversal of the Biden win is very unlikely. Dollar weakness is set to persist, as the US economy is again facing headwinds due to the new lockdown restrictions, and as the relative disadvantage of EU in this regard has disappeared. INR could look to test the lower end of the range at 74 since risk appetite is fairly strong in markets in spite of the lockdowns. If the restrictions stretch well into December, odds are that another bout of risk aversion and dollar strength could return then. But in the immediate term, INR is safe and stable.

USD INR views today (19/11/2020) around 8:00 am

INR likely to open around 74.20/30

The Dollar is flat and DXY is trading around 92.40. EUR is at 1.1840 and USDJPY at 103.90. US equities fell more than 1% yesterday, as the announcement of more lockdown measures in NY and other states rattled the markets. Indian equities continue to shine, with yesterday seeing another 0.5% jump.

Coronavirus infections jumped 600k worldwide yesterday, with the US reporting a surge of 170k. The fatality count has sharply increased across the world. The US is reporting close to 2k deaths a day now and EU countries continue at a pace of 500-800 a day. While the case fatality rate is much lower than the March-April period, the sheer number of infections could overwhelm the health care system and hence has governments worried. India reported 46k new cases and close to 600 fatalities. Delhi remains the major hotspot, contributing to  16% of the total Indian cases and 22% of the country’s fatalities. While the overall positive test ratio for the country is around 4%, Delhi has been reporting a 12% ratio. Maharashtra continues to run at a 10% test ratio, which indicates the worst is not yet over there. West Bengal and Kerala also are not out of danger, with around a 9% positive test ratio. The risk now is that the virus could resurface in other calmer states in December, as temperatures fall.

The new INR range between 74 and 75 is consolidating. The vaccine news is factored in for now, and markets are focusing on the ongoing lockdowns. The monthly economic data releases in December 1st week are now important to gauge the full impact of these restrictions. For the next few days, one can expect that the Rupee would meander along in the range if no unexpected headlines hit the markets.

USD INR views today (18/11/2020) around 8:00 am

INR  likely to open around 74.50

USD is slightly weaker and US equities took a breather yesterday from the relentless rally. DXY is at 92.40 and EUR is hovering around 1.1855. US equities fell yesterday by 0.2%-0.5% as concerns about the virus-related shutdowns started to weigh on the markets. USDJPY fell to 104.05 on the back of this mild risk aversion. US retail sales came in much lower than expected, reflecting the lack of stimulus and the ongoing wave of localized shutdowns.

Yesterday saw around 530k new cases worldwide. The US now has around 1450 deaths consistently, while the EU countries have now reached the 600-800 range for the number of casualties per day. With winter set to intensify, one can expect the fatality numbers to move even higher unless stringent lockdowns are enforced. As for India, though the caseload has been seen to be falling, the positive test ratio remains sticky at 4% and the daily fatality count is stubborn at the 450-500 mark. As winter gets more severe, especially in the northern parts, one can expect more cases and fatalities for the country as a whole. December is a crucial month for the world as far the virus evolution is concerned.

Various serosurveys put the antibody prevalence in 15% to 40% of the population at different places. The Delhi experience of a third wave suggests that the threshold for herd immunity is fairly high. Hence, until the vaccine-induced immunity reaches 50%-75% of the population, the disease will remain prevalent. Further, antibodies seem to survive for a few months, and hence the pace at which the vaccine is rolled out, and the acceptability of the vaccine in the population are critical factors in building herd immunity. Incidentally, the Indian population seems to be most in favor of accepting the vaccine, as per a survey.  Markets remain concerned about the economic impact of the virus but are being pulled up by the ever-present easy liquidity.

The INR range is now solidifying, with the push and pull of opposing factors. With the US election impasse still continuing, December could bring more headlines and volatility for markets. But, a tenuous balance remains between the virus-related concerns and the liquidity fuelled binge. USDINR range is intact for now.

USD INR views today (17/11/2020) around 8:00 am 

INR likely to open around 74.30/40

The Dollar has been subdued as risk appetite continues to dominate market sentiment. Most equity markets were up yesterday, with DOW and S&P gaining another 1%+. The Dollar Index is at 92.55 and EUR is above 1.1860. Markets were buoyed by the news that the Moderna vaccine is 95% effective, giving another alternative to the Pfizer one. Though this is the first-ever mRNA vaccine to be used in humans, and hence no long term consequences can be deciphered now, it is easier to handle (no cold storage requirements) and seems effective in the phase-3 trials.

The number of infections jumped 480k worldwide – much lower than the trend – due to the weekend effect and Diwali effect in India. More countries and local governments are moving towards lockdown restrictions – the latest being Germany and California. Markets are looking past the economic impact of these lockdowns and hoping that vaccinations can lead to a complete normalization by Q1 of next year.

In terms of economic data, the latest India CPI printed at 7.61% – trending higher than the RBI forecast – due to higher food prices. Persistent inflation at these levels can lead to more entrenched inflation expectations in the economy and lead to an eventual Rupee depreciation over a period of time. In the short term, the Rupee could continue to be in the new range between 74 and 75, since factors such as low current account deficit and USD weakness balanced out the virus and lockdown related concerns.

USD INR views today (13/11/2020) around 8:00 am

Happy Diwali to you and your family!!

INR likely to open around 74.70/80

DXY is flat at 92.90 and EUR is slightly higher at 1.1808. Equities had a red day yesterday as virus concerns dominated the narrative. Further, stimulus hopes have dried up amid the election impasse. With more and more local governments moving towards lockdowns, the economic impact on businesses over the next 2 months could be permanent as a second lockdown could mean bankruptcy for a lot of small businesses. The DOW fell 1%, and Indian frontline indices fell 0.5% odd.

The number of new infections worldwide stood at 630k, with the EU reporting the largest chunk of cases. The number of deaths has consistently started to exceed 10k a day globally and at this rate, there is a risk that the death count in most countries reaches close to the previous peak, which would be disastrous. The erstwhile hotspots in the US (NY and NJ) have been seeing the start of a second wave, which is a news item of concern, as this means that either the antibodies have a short lifespan or that the herd immunity threshold is not as low as initially thought. This development is also evident in India’s numbers. The Indian numbers remain steady, but Delhi is now compensating for lower numbers in states such as Maharashtra and Tamilnadu.  Delhi has had 30% seropositivity in the previous surveys, but the fact that a new wave has hit Delhi means that the risk of a renewed infection wave in the coming months in other states continues to be high. The virus concerns would keep pressuring the Rupee.

INR is biased towards more depreciation now, but whether the momentum is strong enough to push the pair above 75.00 is the question. If large lockdowns restrictions get applied in the next few days across the world, the resulting risk aversion can indeed keep lifting USDINR. But, given that India is relatively better off on the virus front, and since the structural demand for USD in terms of the Current Account Deficit is low, odds are that this could be a measured depreciation.  The new INR range between 73.90 and 75 seems to be consolidating, with the bias changing with headlines.

USD INR views today (12/11/2020) around 8:00 am

INR likely to open around 74.50

USD regained some strength yesterday, after a few days of sharp declines. DXY is trading close to 93.00 and EUR is at 1.1780. The DOW ended flat, despite NASDAQ gaining more than 2%. Indian equities continue to surge, and yesterday saw another 0.9%+ gain for the frontline indices.

The virus trends remain across the world, with the EU and US now registering a steep rise in hospitalizations and fatalities. The US had 1350+ deaths, while the major EU countries reported fatalities in the 400-600 range. India has been seeing stagnation in case growth and fatality numbers, and the hope is that these two do not turn around back to a growth phase. Early economic indicators are signaling that the global economy is again reversing in the US and the EU and December economic data could reveal the reversal. While vaccination is on its way, for all practical purposes, it would take the better part of 2021 to get a reasonable chunk of the population vaccinated, and hence, the economic impact of the virus would be meaningful for a couple of quarters more at least.

USDINR failed to break the 74 support and is now back to the middle of the current range. The reversal in the USD weakness trend could lead to a small bias towards INR depreciation, but structural factors such as near-zero current account deficit and good RBI FX reserves are helping INR. It seems that the new range below 74.90/75 could continue for a day or two more at least.

USD INR views today (11/11/2020) around 8:00 am 

INR likely to open around 74.25/30

The Dollar is trading flat from yesterday, with the DXY at 94.20 and EUR at 1.1820. US markets had a mixed day, as DOW ended higher by 0.9% but tech stocks were sold off. Indian frontline equity indices continued their surge, with another 1.5%+ gain yesterday. US long term bond yields remain elevated on the hope of an economic revival and increasing US debt. The US 10y (now at 0.96%) is an important variable for USDINR.

The coronavirus infections surged yesterday across the EU, but more importantly, the fatality numbers are now sharply higher than a few weeks ago. France reported 800+ deaths while the UK and Italy reported 500+ fatalities. While the death rate as a proportion of the case addition is way lower than the previous peak, the absolute fatality numbers are starting to reach close to the previous peak. The US reported 1350 deaths yesterday, and the total number of hospitalizations across the country has crossed the previous peak. While the vaccine hopes are carrying the day for the market, the fact remains that the economic stress due to lockdowns in the EU and potentially in the US would remain till Q1 of next year. India remains at the 45k level for the number of cases and the fatality count is refusing to fall below 500 consistently, primarily due to the “third” wave in Delhi. With the winter season upon the country, the risk remains that the gains made until now could be squandered away.

USDINR has been holding the 74 marks well despite the overwhelming global USD weakness. US election outcome is still uncertain and the logjam could continue until at least December unless Trump unexpectedly concedes. The range for the Rupee could be between 73.90 and 74.80/90 zone for now.

USD INR views today (10/11/2020) around 8:00 am

INR likely to open around 73.90/74.00

USD reversed some of the losses of the last few days yesterday, on a sharp rise in US yields (10y rose to 0.94%). EUR is at 1.1810 after being at a high of 1.19. DXY is close to 92.80. The news from Pfizer that their vaccine is found to be 90% effective in trials, led to a surge in the already-surging equities.  US yields shot up as expectations of normalization of the economy drove the steepening of the yield curve. Though the DOW surged close to 3%, NASDAQ fell, as investors moved out of tech stocks. Indian equities continued their merry run, with another 1.7% odd increase in frontline indices.

The virus trends are intact, but the weekend effect distorted the true picture yesterday. EU remains in a surging second wave, and among the news of concern is the fact that Denmark has been seeing a new variant of the virus (transmitted from mink) that is resistant to the antibodies generated against the normal mutations. Other EU countries have barred travel from Denmark, but more data is needed to understand whether this mutation presents as another disease, resistant to the vaccine being hoped for. India reported a fall in cases to 37k yesterday, and the fatality growth also fell below 500 again.

 

Various factors are just in the right balance for the Rupee now. On the one hand, rising US yields are detrimental to emerging market currencies, but, risk appetite is strong on the vaccine hopes. While the Biden win is sure to lead to more stimulus, a potential Trump legal challenge leading to a long uncertain period until January is a real possibility. While the strong performance of India on the virus front is a positive factor, protracted lockdowns in the EU and potentially the US are a drag on the global economy and flows. For now, the Rupee remains in a range and might continue to do so for a few more days until one of these factors provides a clear direction.

USD INR views for (09/11/2020) around 8:00 am

INR likely to open around 73.90/74.00

The Dollar continues to be beaten down, with the Dollar Index now at 92.30. EUR is sharply higher, reaching 1.19. Equity futures are up by more than 1% as the market likes the split in power in the US (that senate continues with the Republicans). Markets hope that tax cuts and deregulation cannot be reversed by the Biden administration. Indian markets are also buoyed by the positivity in the US equities.

The number of new infections is down below 500k worldwide, due to the weekend effect. But, the trend remains up in most of the EU countries, and the fatality count has surged to around 50% of the previous peak. The UK and other EU countries such as France and Italy are in the midst of national lockdowns, though not as stringent as the first one. The US consistently is at 100k infections per day, but since Trump is in charge until Jan 21, a national lockdown is unlikely there. India remains on the downward trend but has been seeing stagnating numbers at around 45k new cases per day. At this rate, it would be December end, before the first pandemic wave is over in India.

INR is now balanced, given the global Dollar weakness wave. Economic data has not been much relevant for markets given the election uncertainty. But, behind the veil, the US economy seems to be slowly on a recovery path, and the latest non-farm payroll beat expectations with a 638k job growth. The Rupee is now back to being in a range, as the global Dollar weakness counter-balances the virus worries. How long would this balance continue remains a question, but for now, INR is in a stable zone.

USD INR views for (06/11/2020) around 8:00 am

INR likely to open around 74.10

The Dollar continues to be badgered on strong risk appetite across markets. US equities had yet another 2%+ day, on a narrative that irrespective of the election uncertainty, the market would be supported by QE and fiscal stimulus. Dollar Index has collapsed to 92.55, as EUR has jumped sharply to 1.1810, and USDJPY is trading at 103.70. FOMC decision retained the status quo, as expected. They reiterated their commitment to keeping the policy accommodative.

The worldwide Coronavirus infections jumped 600k yesterday, which is the highest ever. The US continues to top the list with 110k+ infections, and the EU is now suffering heavily under the second wave. France again reported 50k+ cases, and Spain, Italy, and the UK are at 35k cases consistently. Worryingly, yesterday had the highest death toll in the EU in this wave. All the countries have at least 350 deaths per day. There is no stopping this winter wave now unless stringent lockdowns are enforced again at a huge economic cost. India has seen a jump in fatality growth, with yesterday seeing another 700 deaths. The downward trend in fatalities is now halting, and we have to wait for a few more days to see if the increase in fatality growth would reverse. The positive test ratio remains in the 4-4.25% range, which is positive.

INR has turned around from a potential depreciation bias in the short term, thanks to the overwhelming global Dollar weakness. The US elections are still undecided and it seems like that Trump campaign would contest most of the swing state elections in court. We can expect protracted court battles going until December. Markets have now shrugged off the election event, and risk appetite is strong, helping INR. Given the previous range is broken convincingly, the 74 levels could act as strong support for USDINR. But, the short-term remains volatile with no real direction apparent, as competing factors such as US stimulus and the surging virus and lockdown fears keep INR guessing.

USD INR views For 05/11/2020 around 8:00 am

INR likely to open around 74.20/30

The Dollar whipsawed in a range as election results in the US moved from a clear Trump victory to a potential Biden presidency. EUR is at 1.1730 and the Dollar Index moved between 93.40 and 94.00. US equities, though, went higher despite the election uncertainty around lawsuits, as markets seem to believe that the losses for Democrats in the Congress elections indicate a potentially moderate agenda for Biden instead of a tough regulatory regime.

US elections are still undecided, but as things stand, Biden is very close to the 270 marks. With Wisconsin and Michigan called for Biden, Arizona becomes the key state along with Pennsylvania for Trump, assuming he would somehow manage to hold Georgia. The odds of a Biden win are much higher at this point. But, in the US congressional elections, Democrats flipped 1 senate seat and Republicans gained 5 House seats, implying a continuing Democratic hold on the House and Republican control of the Senate. There are now court battles to be fought in various states and it might eventually take a few days to declare a winner in the presidential election.

The FOMC meeting is underway, and not much is expected from the Fed at this meeting. The December meeting is more critical in that the FOMC might take the new presidency into account due to the differences in government stimulus packages expected. As for the virus, the story remains that the EU is getting hit badly by the second wave, as fatalities also jump to 300-400 range in France, Spain, Italy, and the UK. The US also remains vulnerable with 100k+ cases and 1200 deaths. India remains on the downtrend, but yesterday’s fatality count of 700+ does raise concerns and we have to watch if it is a one-off spike.

INR could move both ways, but within a range, depending on headlines. In the short-term, a Biden win might end up positive for INR, as more stimulus in the US could mean higher risk appetite in global markets. But, the risk remains that the Biden administration might handle the virus-related lockdowns more stringently and could potentially lead to lower economic activity in the immediate term. Over the longer term, the impact on INR is not apparent now, as many factors such as the US-China relationship, US treasury yield behavior on massive deficits would determine the outcome. For now, a range between 74 and 75 seems to be the base case for the Rupee.

USD INR views for 04/11/2020 around 8:00 am

INR likely to open around 74.50

As US elections get underway, markets rallied in the hope of a clear winner and the USD fell due to a lack of risk aversion. It seems markets are looking at a Biden win as a win for more stimulus package, and a Trump wins leading to a continuation of pro-market policies. DOW jumped 2.2%. EUR is at 1.1720 and the Dollar index moved lower from 94 to 93.50. Early results indicate a tough battle ahead in the US elections, with Florida becoming the key state. It is too early to call any decisive result at this time.

The coronavirus infections rose 475k yesterday, but more importantly, there is a significant jump in the death toll reported in Europe. France reported 800+ fatalities and the UK had 400 deaths. While the sudden surge is one-off, it is clear that fatalities are on the rise, and lockdowns could continue to drag on for a longer time than expected. The US reported 90k+ cases and 1200 deaths, again the deaths spiking to the September/October highs. India’s infection trends remain the same, with 46k cases and around 500 fatalities.

INR remains biased towards depreciation, but given the risk asset rally, the Rupee should be protected from a large move. We have to wait longer to gauge the US election impact on risk assets and the Rupee, as there are factors with either result from the election, which are pro and against risk appetite. For now, a range-bound INR should be the base case.

USD INR views for 03/11/2020 around 8:00 am

INR likely to open around 74.50/60

The Dollar is holding well ahead of the US elections today. US equities had a surge of 1.5% yesterday. While markets assess the probability of Trump win higher than what it was a few weeks ago, the polling and betting circles continue to give Biden a higher chance of a win. The worst-case scenario is that the election is too close to call by tomorrow morning India time, and ballots are contested by either party. Further given the large number of mail-in votes, which are higher in some parts of the country than the total 2016 vote, the results might be delayed, unlike previous elections.

The virus continues to rampage in the EU. France reported 50k+ daily cases – a record. The UK has been at 20k daily cases, and Italy also has now a full-blown second wave, with a 20k+ increase in infections. Deaths are increasing, albeit at a much slower pace than in the first wave. Western Europe has crossed the US in deaths per day, and lockdown restrictions have been implemented in different ways across the region. As winter arrives, it seems stringent lockdowns and deterioration of their economy are more likely now. The US also is consistently seeing a 100k jump in cases, as the virus spreads to most of the US states. India has been in a clear downward trend in cases for some time now, and the positive test ratio is indicating a continuation of that trend. India is back to April/May level for the ratio, which is a good sign. Mortality should slowly inch lower in the next week or two.

INR has natural pressure to depreciate now, given it has been out of its previous range. But, the relative calm in India on the virus front is a helping factor for the rupee, buffering a large depreciation. Indian markets are held up by the hope that the falling infection rates would spark more festival activity, and that the government would provide focused stimulus to some sectors.

In the immediate term, if Trump wins, there could be a clear divergence between the EU and the US in the handling of the virus, and there is a possibility of EUR slipping against the Dollar over the next few weeks. The US election can influence INR in another way – through rising US yields, more so if democrats win the election. Concerns around rising twin deficits in the US, and a potential pick up in inflation, have led to a 15-20 bp rise in the 10y over the past 3 weeks. If yields rise faster, all risk assets including INR are vulnerable. The election event is important in more ways than one.

USD INR views for 02/11/2020 around 8:00 am

USDINR Likely to open around 74.50

There are two major worries in the market at this stage: 1) US Election and 2) Rapid spread of Covid in the US and EU.

US Election will happen this week and may take a few days to come out as different states have put different dates for certification. How uncertainties are likely to continue even after the election in case there is a change of Guard – i.e. Biden wins. Possible changes in tax and regulations may derail markets though on the stimulus front there shouldn’t be much of a difference.

Covid is certainly going to impact Europe a lot in the coming days and European problems could be a precursor to what’s in store for the US in the flu season.

Will reach out soon to you with specific recommendations around your exposure.

USD INR views for 29/10/2020 around 8:00 am

USDINR is likely to open around 74.20 today.

Dow fell approximately 3.5% yesterday. European indices were all down between 2.5% to 4.0%. The dollar index strengthened to around 93.50 as risk aversion made the US Dollar stronger. CBOE VIX, the volatility index, reached 40.0 which is a level not seen since April 2020 though it’s still lower than the peak reached during mid- March.

Is it the beginning of Corona Crash 2.0?

Yesterday was a new record as the world’s total number of cases crossed 5 lakhs in a day. The US saw 80K+ infections and Europe around 2.5 lakhs. Germany and France announced new month-long partial lockdowns to avoid a potential ICU bed crisis.

India’s number of cases remained at 50K and daily death was around 500. These are relative improvements but we have to see how infections behave as we enter winter in a month’s time.

As per our algo, a critical thing to watch is if USDINR remains at 74 + levels for the next 4-5 sessions. If it continues to hold at 74 + levels then exporters can expect better levels to hedge. If goes back to sub 74.0 levels then again importers can manage with a medium hedge ratio.

It’s also an opportunity for the markets to correct the stimulus-driven overvaluation compared to economic fundamentals.

Our reasonable estimate is that the market will be in risk-off mode for the next 10 days till the US election at least. 74.0 + levels remain more likely during this phase.

USD INR views for 28/10/2020 around 8:00 am

INR likely to open around 73.75

USDINR lost the momentum to move past 74, and the range continues to hold. Dollar gained mildly, with EUR at 1.1780 and the Dollar Index at 93.15. US markets fell by 0.75%+, but Indian markets held well with a 0.9% gain on news of the central government package during Diwali.

The virus continues to spread wildly across the EU and it is a matter of time before more regions/countries move to a total lockdown. The case growth in France (50k+ per day) is double that in the previous peak, though a part of the rise can be attributed to the rapid increase in testing. Hospitalizations are also increasing rapidly in the EU, though the fatality rate is way lower. While countries like Russia seem to be against lockdowns, the EU governments have been moving towards targeted restrictions such as the closure of restaurants, malls, etc. The US also is running at 80k per day consistently.

The infection in India is firmly on a downward trajectory, the latest being just 45k case additions. India is back to July levels both in infection growth numbers and deaths (around 500), with a 4.5% positive test ratio. Given that the restrictions in India were more long-drawn than in the EU and the US, the hope is that a second wave could be averted here.

As US elections near, markets are a bit jittery around the outcome and worries about whether it would be a smooth election. China announced that it would do away with counter-cyclical factors in the management of the Yuan, and markets have interpreted this to mean that they would keep CNY weaker. The announcement did not create a significant impact on offshore INR. But, in times of USD strength, CNH might see sharper falls than in the past. As for USDINR, the current range is back in play now and it seems that the range could be intact until at least the election, though the bias would be towards Rupee depreciation. 

USD INR views for 27/10/2020 around 8:00 am

INR likely to open around 73.90

The Dollar continues to be stable amid concerns about the massive virus wave in the EU and the US, and lack of progress in stimulus talks. The DOW crashed by 2.2% yesterday. Dollar Index is at 93, and EUR is surprisingly resilient above 1.18. INR is under pressure due to the general risk aversion. Indian equities fell 1.3%+ yesterday.

The number of new infections is at 410k worldwide despite a sharp fall in Indian cases and the weekend effect. France is leading the EU wave, with around 50k new cases a day. It is now clear, that the caseload across the EU and the US is going to remain elevated going into the winter/flu season. India is seeing a sharp reduction in reported cases, the latest being 35k. The positive test ratio is now around 4.5% and the fatality count is also falling, now at less than 500 a day. There is an unambiguous trend of a fall in cases in the country, and at this rate, one can expect that the virus would become a non-issue by December end.

INR is close to the top end of the band. There are significant stop-losses around this band and this would be a third attempt to break the 74 resistance. With US elections approaching with all its uncertainties, and the virus concerns unabating, now is an apt time for USDINR to attempt a move higher. If 74 is broken convincingly, there could be new momentum for USDINR, after being in a range for quite some time. But, it all depends on whether the current range can be broken.

USD INR views for 26/10/2020 around 8:00 am

USDINR is likely to open around 73.80.

The US Election is just 8 days away with polls and betting predicting Biden winning. The market is comfortable with both parties as a stimulus can be expected to continue in both regimes. However, which party will control the two houses will have implications on policy decision making. In any case, some uncertainties loom as the election is close and that will have an impact across markets.

Coronavirus has come back heavily on Europe and the US with record infection numbers. The fatality rate so far seems to be lower but we need to wait for a couple of more weeks before concluding since the fatality graph is still pointing upwards. While Indian numbers seem lower, many more people in known circles have been infected with corona now. Weekend numbers are deviations but France had 52K infections in one day whereas India had 45K and US 60K ( down from 79K a day before).

This week’s ECB meeting is there and ECB’s stance on monetary policy should give some more direction to EURUSD. Given the infection levels in Europe and looming lockdowns, a softer EUR can be expected in the coming days.

Our Algorithm’s triggers for buying USDINR are concentrated around 73.90-74.30 levels. If INR depreciates and breaches these levels, the indication will be to hedge more for importers and hedge less for exporters.

USD INR views for 23/10/2020 around 8:00 am

INR likely to open around 73.70

The Dollar recouped some losses yesterday, and the Dollar Index is close to 93 again. EUR is at 1.1800, but JPY has strengthened to below 105. DOW eked out a gain of 0.5% ahead of the final US presidential debate. Indian markets fell slightly yesterday, tracking the day before yesterday’s US market. US equities are still hopeful of a stimulus package soon, but election headlines could take over markets from next week.

The total infections worldwide jumped 470k – the highest ever daily increase. The virus is rampaging across the EU now, at the rate of 40k in France, 20k in Spain and the UK, and 10k+ in Germany. While EUR is still holding on due to the overall USD weakness, the relative advantage that the EU had is now gone, and more lockdown restrictions are popping up by the day. Next month’s macro numbers could suggest a much different story for EUR.

Even the US is seeing the resurgence of cases, now growing at 70k a day (compared to 35k when the second wave declined a month ago). Interestingly though, the flu deaths in the US have been far lower when compared to the same period in 2019. While it is still early to opine on this fact, it seems that COVID-related precautions could lead to a much lower prevalence of the flu. India continues to see a sharp fall in caseload, the latest being 54k. The 3-day moving average of the positive test ratio is 4.7% and the death count averaged 700 over the past three days. The positive test ratio was at 13% in July, 8.5% in August, around 7.2% in September, and around 5% now, a clear trend downwards. In all, India is now in a positive trend, though certain states such as West Bengal which have been seeing a resurgence, could replace those states which bore the brunt until now.

Today could be yet another day of range-bound INR. While the US Dollar is weak, probably reflecting the view that a Democrat presidency could mean much larger budget and current account deficits. While the risk appetite is holding in global markets, there is a possibility of a long-drawn US election battle where both sides contest the postal ballots and alleging fraud. Until the election time, USDINR could continue to move in the range, pushing and pulling depending on each day’s headline.