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Daily Morning Update :Global market and USDINR

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USD INR views today (22/01/2021) around 8:00 am

USDINR Likely to open around 73.05, EURINR around 88.90, and Sensex to trade between 49,200 – 49,600 

Global risk sentiments remain mixed and jumbled up still looking for a direction. On the Fx still, the direction for the next 5% move is unclear. Today, on the one hand, the dollar index is close to slipping below 90.00 again and at the same time, most EM currencies are weaker against the USD. 
 
Bitcoin, which some consider as neo Tulip ( Ref: Tulip Mania), fell over 20% in a week’s time from 42,000 peaks to sub 30,000. Is it an early signal for the market to deleverage? 
 
Interestingly last 2 Fridays (8th and 15th) have been positive for the Dollar and a little negative for stocks. Fridays are important since if traders are concerned about sharper movement in any one side, they would try to adjust their position before the weekend. Let’s see how today’s market behaves.

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USD INR views today (21/01/2021) around 8:00 am

USDINR Likely to open around 72.90 and Sensex has a good possibility of touching 50,000 today. 
Global risk sentiments remain positive with equity up in most countries, dollar down, EM currencies up, commodities up. The reason broadly cited as stimulus friendly policies of Biden. 
 
Global Virus related deaths saw a record number yesterday at 17,000+ in a day. Nowadays daily numbers are not accurate reading as it involves underreporting during the weekend and catching up during the weekdays. However on a weekly basis also the trend, unfortunately, is upwards. 
India seems to be out of the woods for now unless new virus strains start affecting. 
 
On the financial markets, the game is simple – Fed driven Liquidity driving all asset classes. Valuations are stretched but still positivity prevails. One of the way 2021 risk sentiments can pan out is as follows – 
 
Sometimes now or during the first half of 2021, markets correct decently with INR being around 76 or 77 ( Dow, Sensex down 20%) and then-Fed chips in with a larger stimulus to restart dollar decline. The Fed will not do further stimulus unless there is a justification in the form of equity crashes. 
 
The longer it takes to correct, the sharper the correction will be. If the first half of 2021 carries on in a stable manner with INR in a range of 72.00 to 74.00 then during the second half we should be seeing 78.0 / 80.0 kind of levels. 
 
US will not allow dollar collapse or too much of weak dollar since that starts a question mark on the dollar dominance as a reserve currency, savings currency of the world. So to maintain confidence on the dollar only a moderate dollar depreciation is palatable to the USA.

USD INR views today (20/01/2021) around 8:00 am

Hi –  Good Morning. 
USDINR Likely to open around 73.10 and Sensex around 49,500.  
Today so far looks to be a risk-on day as the struggle continues for market to assume any trend clearly. 
Janet Yellen,  who is likely to be Treasury Secretary under Biden Government has spoken about not having any weak dollar policy. We were expecting some rhetorics on these lines where someone will talk about strong dollar policy etc. However, Yellen has such a strong track record of being dovish on the monetary policy front, that we have to see what action she takes. As of now she is asking for more fiscal support is what appears to us.
Market Chatter about India’s NPA and shadow banking has reemerged after RBI’s financial stability report.  While NPA at September end 2020 been 7.5%,  RBI expects the same to reach 13.5% by Sept 2021. Now 13.5% will be a number not seen during last 20 years. 
On Virus and vaccine – Germany extends lockdown, US reaches 4,00,000 total deaths with last 1,00,000 coming in last 36 days. UK and Mexico fatalities continue to worsen. 
For the markets, I see one more round of virus related stress coming.  Trigger could be a) new strain 2) European lockdowns 3) Overestimation of vaccine related positivity. 
Indian markets have received around USD 2 billion of FPI inflows so far in January.  USD 2.5 bn. Inflow in equity and 0.5 bn outflow from debt. 

USD INR views today (19/01/2021) around 8:00 am

INR likely to open around 73.15

The Rupee slightly depreciated yesterday, but the overnight moves in USD were muted on account of the day being a US holiday. DXY is slightly lower at 90.70. EUR is at 1.2090, JPY at 103.70, and GBP is at 1.3590. Indian markets fell 1% for the second consecutive day yesterday, showing initial signs of a top forming.

The virus trends yesterday were distorted due to the weekend effect, but there is some evidence of moderating spread in the US and UK, albeit slowly. India reported <10k cases yesterday, for the first time since early June. The number of tests per day has also been coming down which is not necessarily a bad thing as it can be indicative of a lesser need for people to take the tests. The mortality count increase has been less than 200 for some days now. India is on track for an end to this wave of the pandemic by March-end.

USDINR failed to breach 73 yesterday and turned slightly up owing to risk aversion and the general Dollar stability. The events such as Biden’s inauguration and Janet Yellen’s speech (for confirmation process as treasury secretary) are unlikely to disrupt markets in a big way. We can expect a few more days of this range until there is a clear direction for the Dollar.

USD INR views today (18/01/2021) around 8:00 am

INR likely to open around 73.15

The Dollar held on to some gains on Friday, as US retail sales data for December signaled a dismal US economy. Retail sales fell 0.7% in December over the previous month, after being down 1.4% in November, despite the fact that this month is generally buoyed by holiday shopping. While markets rely on vaccination hopes, there was some acknowledgment on Friday that there are few more months at least of bad economic performance. US equities fell 0.5%-0.8% on Friday. EUR has fallen to 1.2075, USDJPY is stable at 103.80 and GBP is lower at 1.3580. Indian equities also dropped 1.1% on Friday after days of a continued surge.

The virus trends remain the same, and no large deviations occurred over the weekend to worry markets. While India starts its vaccine drive with the Oxford and Bharat Biotech vaccines (Adenovirus and inactivated virus vaccines respectively), there are news reports that some deaths have occurred in Norway after the Pfizer vaccine (which is an mRNA vaccine). Norway has decided to avoid giving the vaccine to the 75+ population as 23 deaths occurred in this age group, especially if they already had serious co-morbidities. One has to wait to see how such news would influence vaccine drives.

INR has been trying to move beyond the 73 mark, but the resurgence of Dollar strength has made it slightly difficult to do so. The range remains intact for now, but the bias is slightly pro-Rupee as the Dollar surge is not strong enough yet to create any sustained risk aversion. This week has Biden’s inauguration and markets would watch out for any violence in Washington on the day. While the US yields have settled lower on Friday after the Retail Sales data, if Biden manages to pass the Covid relief bill soon after the inauguration, one can expect some reversal in the yield again with accompanying Dollar strength. For now, the Dollar is at least holding the fort, and Rupee could continue to meander along in a tight range.

USD INR views today (14/01/2021) around 8:00 am

INR likely to open around 73.15

The Dollar managed to hold ground yesterday, with DXY slightly higher at 90.30. EUR fell to 1.2170, JPY weakened to 103.90 and GBP remained slightly weaker, at 1.3640. Equity markets ended flat in the US, even as Trump was impeached by the US congress for the second time (though it is unlikely that the Senate would convict him). Indian equities were also fairly flat yesterday. US yields fell yesterday as talks of tapering the Fed balance sheet by some officials were countered by others and markets seem to be convinced that the Fed would continue money printing for more time to come.

The UK reported 1500+ Covid deaths yesterday for the first time, and the US continues to record close to 4000 deaths a day. There is a slight dip in the number of cases, but we have to wait for a few more days to confirm the trend. India remains at a consistent trend of 15-17k cases a day and a positive test ratio of around 1.7%-2%. The bulk of India’s cases and deaths are being reported from Kerala and Maharashtra. The positive test ratio in these states remains at around 10% and 5% respectively. Maharashtra seems to be undercounting cases when one looks at the consistently higher relative mortality compared to other states. It seems India is still on track for negligible deaths by March 31st period.

INR is still in the current range, between 73 and 74, and has the opportunity to break the range to the downside if global USD strength does not gain any momentum. The short-term remains fairly balanced or slightly in favor of INR as the US yields have started to reverse yet again. The Dollar strength of the past few days is now stopped in its tracks due to reversing yields. The next few days could determine if the Dollar weakness trend starts again, in which case there could be short-term advantage to the Rupee.

USD INR views today (13/01/2021) around 8:00 am

INR likely to open around 73.20

The Dollar could not hold on to its gains yesterday and lost some ground. EUR is back above 1.22, at 1.2214. USDJPY is at 103.66 and GBP is higher at 1.3675. DXY is almost close to breaking 90 again. US 10y yield fell to 1.11% after rising as high as 1.18%, dragging the Dollar with it.  The Dollar move in the next couple of days could indicate whether the Dollar rally of the past couple of days was just a temporary aberration or is there some more momentum left to it still. US equities edged slightly higher, and Indian equities had yet another 0.5%+ day yesterday.

The virus trends remained the same across the world yesterday. While the caseload in the US was lower due to the weekend lag, the death count reached 4000+ again yesterday. The UK had 1200+ and Germany reported 1100+ deaths. Merkel talked about a 10-week lockdown in Germany, indicating that the risk to the economy is very much present. It is surprising that France, Spain, and Italy have peaked out sooner than expected, implying that countries that had a large phase-1 could have reached closer to herd immunity. In that regard, India seems to be at an advantage, in that the phase-1 here took a much longer time and was not localized to just one state like the US. India reported 15k new cases and 200 deaths and there is a clear trend downwards in the positive test ratio also (the latest being between 1.5% and 2%). Once Kerala sees lower numbers, the overall numbers could improve even more.

The turn of events with regards to USD evens out any bias against the Rupee. The current range between 73 and 74 is expected to hold, but the next couple of days of Dollar behavior could indicate whether INR could move towards 74 or not. The medium-term risks remain elevated for the Rupee, though not apparent now. Equity markets are behaving in a very typical way indicative of irrational exuberance. While the 10y yield has fallen today, the Democrat plan of large fiscal spending could again bring about some pressure on the yields. Further, once the virus issue tapers down in the next 2 quarters, the Fed has the task of tapering the QE down. With this sort of market valuations, any talk of taper could trigger another tantrum. The short-term though is now neutral and USDINR could again glide in the current range for some more time.

USD INR views today (12/01/2021) around 8:00 am

INR likely to open around 73.50

USD strength gained some more momentum yesterday. DXY is higher at 90.50, EUR lower at 1.2150, JPY at 104.15, and GBP flat at 1.3520. DOW fell 0.3% while NASDAQ saw a fall of 1.25%. US 10y yield continued its rise, now at 1.15%. Indian equities had yet another day of joy ride, with a 1% gain for the frontline indices.

The virus continues to bother the US and Europe. The vaccine rollout has not been up to speed in the US and the caseload continues to jump fast. While the weekend effect has depressed yesterday’s official count, the trend remains ominous. The US especially is seeing increasing deaths and the trend has reached 4000+ per day consistently.  India is slowly seeing a reduction in caseload, with the latest being just a 12.5k rise. But the positive test ratio remains at around 2%, indicating that the infection remains steady in its transmission rate and the low case count is due to fewer tests done.  But, the fall in tests done per day is also indicative of slowing infection, especially when there is no dearth in testing capability. Fewer tests mean fewer people are getting tested for lack of symptoms. The death count has now been below 200 for two consecutive days, and it seems the fatality count is finally converging to the lower case count. There is no evidence of the second wave in India. With winter over in a few weeks and the vaccine rollout slated for the 16th, things are looking up for India compared to the US, Europe, and Brazil.  INR can derive some positivity from India’s COVID advantage but is vulnerable due to the equity valuations relative to the economy.

The RBI’s latest Financial Stability Report (FSR) also points out the disconnect between the real sector and the financial markets. This remains the biggest risk factor for 2021. The surge in US yields is a critical development, as rising yields typically lead to quantitative strategy selling (such as CTAs etc) in equity markets. The Dollar has been battered for a long time now. The durability of the current reversal in the USD weakness trend is the short-term factor that would determine the INR path. Within the current range between 73 and 74, the bias has now shifted against INR, though the range is still intact.

USD INR views today (11/01/2021) around 8:00 am

INR likely to open around 73.30

The Dollar gained some strength on Friday, with the Dollar Index moving back above 90.  EUR is trading at 1.2185, USDJPY at 104.06, and GBP is at 1.3525. The Dollar gained back some ground after a long time, primarily driven by the spike in US yields post the Democrat win in Georgia. The US 10y is now trading at 1.11% on rising stimulus expectations. For now, the US and other equities have ignored the rise in yields, but cannot ignore it after a point in time. The US jobs data on Friday disappointed with a net job loss of 140k, an indication that the economy is being wrecked by the ongoing lockdown restrictions. Indian equities had a good day on Friday, with a 1%+ gain.

The virus trends have worsened in the US, with the daily addition to caseload crossing 300k. There is a talk of a US-specific mutation causing the surge, but the news has not received much attention as the UK strain. India has reported <200 deaths after a long time yesterday and there is no perceivable jump in infection rates despite the presence of the UK strain. In all, with the vaccine rollout from this week, things are looking up for India on this front, and this fact can help some economic recovery and more flows. But, the bleak global picture might hurt the Indian export segment and can increase the trade deficit and hurt the Rupee.

The short term direction of the Rupee depends on whether the reversal in Dollar weakness is a temporary phenomenon or is more durable. If US yields do surge more from here, and the Fed does not move in with the yield curve management strategy, USD strength might have some more legs. The sky-high valuations of risk assets is a big medium-term risk factor for all currencies against the USD. But, INR is still the favorite in the short-term, as risk appetite is healthy at least until the USD reversal proves more durable. The current range between 73 and 74 is expected to hold for some more time.

USD INR views today (08/01/2021) around 8:00 am

INR likely to open around 73.40

Yesterday saw a global Dollar reversal, with DXY back to 89.80 level, EUR to 1.2260, USDJPY at 103.81, and GBP lower at 1.3560. The DOW jumped another 0.7% after being higher by 1.4% yesterday. Equities are clearly discounting the possibility of a major change in economic policy in the US towards more deficits and higher taxes. Indian equities were flat yesterday. The ISM data (both manufacturing and services) surprisingly came in much better than expected, but the employment component was muted. The ADP payroll data indicated negative job growth and today’s NFP data is important for the markets to gauge the impact of ongoing lockdowns.

The virus continues to rampage in the US, Europe, and Brazil. The US saw a 246k jump in cases, and more than 3600 deaths yesterday. The UK and Germany saw 1100 deaths apiece. Brazil has been continually having periods of a sharp rise in deaths, with the latest figure for yesterday being close to 1500. The Indian scenario has been stable, and it seems that the risk of a second wave is slowly dwindling. Though 58 cases of the UK strain were already discovered in India for a few weeks now, there is no apparent jump in cases yet, probably indicating that India could have reached close to herd immunity threshold in many places through an asymptomatic spread. India is better off than most western countries in this regard, and this is INR positive.

The Rupee is completely dependant on the global USD behavior in the short-term. Yesterday’s Dollar strength reflected in USDINR, pushing it back firmly into the current range. Today’s NFP could provide some fillip to USD if job growth is bad (negative) due to risk aversion setting in. For now, it would continue to be a range-bound Rupee.

USD INR views today (07/01/2021) around 8:00 am

INR likely to open around 73.10

The dollar traded mixed yesterday, rising against JPY, but flat against EUR and GBP. EUR is at 1.2330, GBP is at 1.3624 and USDJPY is at 103.05. Dow ended flat, despite Democrat win in the two senate races giving them the control of the senate also. Markets were of the view that a mixed control of the congress and the presidency could keep policies such as higher taxes at bay. Now that Democrats have control of all the three power centers, chances of large stimulus, high budget deficits, and higher taxes have gone up.  US yields could slowly react to the changing scenario. Indian equities fell yesterday by 0.5% odd after being positive for some days.

The virus infection count surged in the US, with 235k case additions and 3500+ deaths. The UK reported 62k cases and 1000+ deaths. India reported 20k cases yesterday, probably owing to higher testing. Kerala and Maharashtra remain the key states which are contributing to the largest chunk of case additions and deaths. These states have a positive test ratio of 10% and 5% respectively, against the country average of 2%-. Markets have come to ignore the virus news as long as the trends are maintained and no new strain is discovered.

INR remains favored in the short-term, as the global backdrop is still benign and risk-rewarding. While USDINR is still within the range, the weak Dollar backdrop could push it lower anytime. The medium-term factors are against the Rupee. Astronomical market valuations could be questioned in 2021 if economies do not pick up soon enough and once the virus panic is overdue to vaccines, the Fed would not have much justification to continue pumping money. Further, structural factors like trade deficit could become relevant if export growth does not pick up soon. But, for now, the Rupee continues to be a slight favourite.

USD INR views today (06/01/2021) around 8:00 am

INR likely to open around 73.10

The dollar turned weaker overnight, with DXY falling to 89.40. EUR is around 1.23 now, JPY stronger at 102.60, and GBP higher at 1.3625. DOW rose 0.5% on rising oil prices, which jumped 5% after a surprise Saudi output cut. Indian equities had another good day with a 0.5%+ jump for frontline indices. No strong trend is as yet appeared in the new year yet.

The virus remains a concern for Europe and the US. The UK reported 60k+ case addition yesterday for the first time ever. The death toll in the US crossed 3300 for the day. While India remains at a lower level of cases, the fatality count seems to be stubborn around the 250 marks. India is still on track towards negligible fatalities by end of March, though.

USDINR has been very docile as there is no direction apparent yet. Macro data out of the US has been surprisingly resilient, as evidenced by the latest ISM data. Markets wait for the US jobs data on Friday, but the trend of USD weakness is very much intact.  All the previous worries such as around the China trade war are now irrelevant to the markets. In our view, two primary factors could determine the INR outlook and the global USD outlook. The first is the virus evolution. Until now, India is yet to face a second wave and if vaccines can thwart the virus in the next few months, it is advantage-INR. The second factor is the market valuation bubble. The Fed is already making comments that they may have to start tapering their QE this year and if such narrative becomes more pronounced, markets are at risk of a panic crash from the stratospheric valuations, and INR can get hurt in the process and USD can regain some strength. But, these are medium to long-term factors. In the short-term, the Rupee remains at a slight advantage as long as the flow situation does not turn.

USD INR views today (05/01/2021) around 8:00 am

INR likely to open around 73.10/20

INR is yet to breach 73 convincingly, as USDINR is likely to open slightly higher due to the overnight risk aversion and mild Dollar strength. In the first trading day of the year, US equities fell 1.3% odd, after being down more than 2% intra-day. Dollar Index is slightly higher, at 89.90. EUR is flat at 1.2250, USDJPY at 103.10, and GBP at 1.3570. Indian equities had a good day, with another 0.7%+ gain for the frontline indices.

The viral caseloads continue to increase in the US, EU, and the UK. The UK has announced a full national lockdown to contain the new strain, which is rampaging at an average of 58k cases a day. Even though the strain is not more deadly, the sheer number of cases could overwhelm the hospital system and create more mortality. Markets are worried that the new UK strain might be very prevalent in the US also. Indian Covid scenario is improving by the day, with the latest death toll falling to 200 after a long time. The positive test ratio is also below 2%. India is on track to NIL mortality by March-end. This is a positive factor for the Rupee.

The short-term INR outlook remains fairly balanced, with the global Dollar weakness offset by the sharp trade deficit jump. If the trade deficit for January also moves above the 15 billion December number, the structural demand for USD could lead to some up move in USDINR. But for the next few days, global factors such as Dollar strength/weakness are the primary drivers of the currency. The next few days of the new year could point out markets’ inclination towards USD weakness. The first day of 2021 has not been good for US equities, and one has to watch a few more days of market behavior before determining if there would be a pause to the global Dollar weakness trend. For now, INR is still the favorite to go stronger, but only slightly so.

USD INR views today (04/01/2021) around 8:00 am

INR likely to open around 73.10

The Dollar recovered some losses during the last trading day, but the broad trend remains that of weakness. EUR is trading at 1.2250, JPY is at 103.10 and GBP is up, at 1.3670. INR looked to breach the lower end of the range on the 1st and is set to do so today. As the new year starts, the primary factors relevant to currencies remain the same. The economic impact of the shutdowns could be more apparent with the data releases starting this week. Equity valuations are in the nosebleed territory and hence is always a risk factor to be aware of.

While positive news about vaccine approvals help the risk appetite, ongoing lockdowns, and no significant reduction in caseload are factors of concern. While India is clearly seeing a reduction in caseload, the fatality count, and the positive test ratio (<2% now), the US and UK infection curves continue to be stubborn.

This week is loaded with data – ISM, PMIs, and US jobs data. Any change in trends could be apparent as we move into the first full week of trading in the new year. The bias remains towards an INR appreciation against USD, and a Dollar weakness against other majors.

USD INR views today (31/12/2020) around 8:00 am

INR likely to open around 73.20

The unrelenting pressure on the USD helped INR move towards the lower end of the current range yesterday. USD crashed again, with DXY falling to 89.50 and EUR touching 1.23. GBP shot up above 1.3640 as Brexit deal positivity buoys the currency. JPY also strengthened to 103.15. US equities had a mild gain, as did Indian indices.

Coronavirus trends are becoming more and more worrying for the US and the UK. With 3800 and 1000 deaths respectively, the fatality count is shooting up in line with the surge in caseload. The UK is now consistently reporting 50k+ cases a day, despite Tier 4 lockdown restrictions. The US reported 230k cases yesterday, and despite various lockdown measures, the caseload has not seen any deceleration there. While India is doing well on caseload and positive test ratio (<2% now), the fatality count is still hovering around the 275-300 mark. Unless Maharashtra and Kerala see a reduction in caseload and deaths, the numbers for the country as a whole would remain reasonably high. The next 2-3 weeks are critical to see if the new strain picks up momentum.

INR could try to push the lower end of the range, now that the Dollar weakness has gotten worse into the year-end. Markets would be highly illiquid today. Whether the RBI would hold the Rupee or not is the primary factor that would determine the direction of INR in the short term. Once into the new year, the initial days could give a hint on whether there is a temporary respite from the Dollar weakness wave.

Wishing you a very happy, safe and prosperous 2021!

USD INR views today (30/12/2020) around 8:00 am

INR likely to open around 73.40/50

USD slipped yet again yesterday. DXY is trading at 89.90, EUR at 1.2260, GBP higher at 1.3505, and USDJPY at 103.60. While Indian equities were up again by around 0.5%, US equities turned red on news that senate republicans have delayed the new stimulus bill. The virus trends continued yesterday, with the UK topping 50k cases. The mortality rate in the UK seems to have stabilized, indicating that the new strain might not be any more virulent than the previous one.  The US reported another 3100 new deaths. Indian infection trends remain in check, but the fatality count is still on the higher side, at 275 (similar level as of June). Going by this speed, we can estimate that India could reach NIL deaths by March 2021.

As long as USD weakness continues, all risk currencies are slated to remain stable and/or gain, and INR is no exception. USDINR could remain in the range for today also, as global markets go into the year-end. New trends can only emerge well into the first/second week of Jan 2021.

 

USD INR views today (29/12/2020) around 8:00 am

INR likely to open around 73.50

The Dollar remained flat yesterday, even as US equities jumped by 0.7%+ on news that Trump signed the stimulus bill. EUR is trading flattish at 1.2230, USDJPY is at 103.75, and GBP lower at 1.3475. Indian equities also jumped 0.9% on the back of continuing risk appetite.

The viral infection trends show a rampaging strain in the UK, as the caseload tops 40k a day. India reported just 16k cases, but the positive test ratio remains around 2-2.5% still. The mortality figures in India are slowly converging to the low caseload stats, with yesterday’s figure reported at around 250 for a fourth day. The US numbers are skewed lower due to the holiday impact and as long as the winter season remains there, it is unlikely that there is a reduction in caseload.

The broad trend remains that of Dollar weakness. Despite the raging virus, risk appetite is strong and hence risk currencies have remained on a strong footing. We have to wait for the new year trends to emerge both in markets and also the virus behavior. Continuing EUR strength, despite massive surge in cases during November/December period is indicative of the fact that markets did not place as much emphasis on the virus impact between the EU and the US as much as they did on the general liquidity-driven risk appetite. The broad Dollar weakness has lifted all major currencies, with AUD moving from 0.58 to 0.75+ and GBP moving from 1.16 to 1.34. Going into 2021, we can expect the Dollar weakness to remain for some time until the market realizes the valuation concerns.

INR could have been stronger than the current level if not for the RBI. Going into the new year, the bias could remain towards INR appreciation owing to the fact that India is now relatively free of the virus compared to the EU and the US. But, generally, a new year brings a different investor perspective regarding the starting valuation of markets. It would be interesting to see if there is any change in the outlook during the initial few weeks of 2021. Finally, the UK strain could disrupt the apple cart if vaccines are found to be ineffective against the strain, and pose a large risk given the market valuations. In all, INR could remain range-bound for now, waiting for further direction.

USD INR views today (28/12/2020) around 8:00 am

INR likely to open around 73.50

The Dollar is flat, with DXY at 90.25 and EUR trading just above 1.22. This is a holiday-shortened week for global markets and no major moves are expected, going into the year-end. But, the markets would be illiquid and any unexpected news could lead to exaggerated moves. The US stimulus bill was sent back to Congress by Trump and some uncertainty around that could impact markets.

There is no worthwhile headline on the new virus strain yet, and decisive answers to questions such as the efficacy of vaccines against the new strain and the potential virulence of the strain are still awaited. Trends across the world remain the same with the UK reporting a consistent increase in caseload and fatalities, and the US yet to show any signs of deceleration in the caseload. India has been seeing an improvement in the fatality count, which has reduced to below 300 consistently for the past 3/4 days.

INR range is very much intact for now and the year could end fairly uneventful. All now hinges on the evolution of the new strain and the vaccine schedule. With markets already at nosebleed valuations, any disruption to the narrative in the new year, related to the virus, can lead to sharp moves. For now, INR is balanced between global risk appetite on one hand and concerns about the virus on the other.

USD INR views today (23/12/2020) around 8:00 am

INR likely to open around 74

USDINR remained in the range below 74 yesterday. The dollar recouped some losses, and the DXY is now above 90.50.  EUR is trading at 1.2170. US equities were down around 0.6% on waning consumer confidence data, and since the spending bill is passed in congress there was not any other positive factor to look forward to. Indian equities recovered a part of the previous day’s losses, but are still down for the week.

The virus fatalities across the world jumped by another 13k yesterday. The UK reported 700 deaths and the death count but still lower than the April peak of 1000+, indicating that the new strain may not be more fatal. The US continues to reel under the virus wave, with 3000 deaths a day and one has to wonder how much spread there has been due to this mutation which is much more contagious. Germany has had a significantly higher caseload and death count in this wave than the April one, primarily due to the fact that they controlled the first phase better. India reported 330 deaths, a slight increase from the previous day. Though the positive test ratio has fallen to the 2.5% bracket, the death count is yet to fully reconcile to the lower infection rate. Worries about the new virus mutation remain unanswered as yet since more studies are being done on the contagiousness and the virulence of the new mutation. This is one single factor that can disrupt the apple cart and can upset the current market valuations.

INR could continue to try to move above the 74 zone, but the global backdrop is fairly benign for now. News about the new mutation and its spread in other countries are now the market-moving headlines. Most importantly, any indication that the new mutation can escape vaccine generated antibodies could seriously disrupt markets and lead to strong risk aversion. The medium-term INR behavior is contingent on the virus news now.

USD INR views today (22/12/2020) around 8:00 am

INR likely to open around 74

Just as the Rupee was settling into a range, fears around the new virus mutation led to risk aversion yesterday. But, Dollar gave up most of its gains towards day-end, and equities reversed 2%+ losses to close flattish. EUR is back above 1.2240 after being below 1.22 briefly. Indian equities fell sharply due to the mutation related fears, but we can expect some reversal today given that global markets have fairly stabilized. For the Rupee, 74 has been the top end of the range, and one has to wait to see if that level would be broken.

The virus trends remain intact. The UK reported 35k cases yesterday, clearly outpacing other EU countries. India reported less than 20k cases after a long time and the fatality count reduced to 300 for the day. The new mutation seems to have a specific change in the spike protein which enabled the virus to escape the antibodies related to the current strain, during experiments on mice as per a research paper. Hence, whether the new mutation renders the existing immunity useless and whether vaccines can work effectively on the strain are the two questions that would determine how the pandemic would evolve and how the consequent economic situation plays out.

INR could test the 74 resistance today. But, given that equities have retraced some of the losses, and the dollar gave up some of the gains, there also is a case to be made for INR stability today. The medium-term is now volatile now and depends entirely on how the new strain behaves with respect to vaccines and existing immunity.

USD INR views today (21/12/2020) around 8:00 am

INR likely to open around 73.50/60

USD continues to get battered. DXY is below 90, EUR is trading above 1.2215, and USDJPY below 103.40. While the US equities fell on Friday, markets are held slightly up today after the 900 billion US stimulus bill was passed in Congress. Virus related news is keeping markets in check, as worries about the ongoing lockdowns continue to simmer in the background.

The virus trends remain unchanged in most countries. The US remains in a severe wave with more than 200k infections and close to 3000 deaths daily. There is no deceleration yet to be seen there. While the EU countries have managed to see a peak, some such as Germany remain in the acceleration phase. The UK is seeing a faster trajectory of infection, primarily due to a new virus strain which is reported to be 70% more contagious than the previous one. While there is nothing to suggest that it is more deadly yet, the primary question is whether the strain is recognized by the vaccine antibodies. The new strain constitutes 60% of all infections in London. The worry now is whether this strain has already spread to other countries (though most EU countries have banned flights to and from the UK yesterday). The next few weeks are critical for this development to play out and if turns out that the new strain is impervious to the vaccine, there is a risk of market fall.

USDINR remains in a range, but with a downward bias. India is clearly outperforming the EU and the US in the virus spread control. The latest trends suggest a positive test ratio of less than 2.5% consistently and the death count has been below 350 consistently. The weak Dollar has been trying to pull USDINR lower, and but for the RBI, there would have been a possibility of a deeper fall in the currency pair. INR range between 73.20 and 74.00 is likely to be held in this holiday-shortened week, as there no evidence of a shift in the RBI stand.

USD INR views today (18/12/2020) around 8:00 am

USDINR likely to open around 73.65

US Equities are at record high and dollar index below 90.00. Today most Asian currencies are weaker against USD and the trend will be applicable for USDINR as well. Most equity markets of Asia are also in red this morning.

The concerns in the markets are that 1) coronavirus still causing record daily infection of over 7,00,000 cases in the world and deaths over 12,000 2) Asset valuations are at record level 3) Brexit will be disruptive and obviously 4) Whether US will be able to pull through the stimulus deal.

USD INR views today (17/12/2020) around 8:00 am

INR likely to open around 73.60/70

The relentless pressure on the Dollar continues. DXY is below 90.50 and EUR is above 1.2150. JPY is stronger, at 103.70. US equities were higher by 1.1%+ on hopes of a stimulus. The infection trends remain intact, with the US reporting yet another 2800+ death count. India is gradually seeing the positive test ratio fall to 2.8% zone now. Moderna vaccine is close to approval in the US, and data shows 94% efficacy.

Markets expect a dovish stance from the FOMC meeting today. The expectation is for an increase in bond-buying and/or yield curve management related activity. INR range is not threatened for now, as a benign global environment is offset by the continuing support of USDINR by the RBI.

USD INR views today (16/12/2020) around 8:00 am

INR likely to open around 73.60/70

USDINR remained flat for yet another day, even as USD weakness continued unabated. DXY is close to 90.20 and EUR is reaching towards 1.22 and USDJPY is at 103.45. FOMC kept rates unchanged, and also stopped short of the yield curve management expected by markets. Powell, in his press conference, did mention that the FOMC stands ready to act if needed. Stimulus hopes kept the risk appetite going. Even though the DOW end flat, NASDAQ jumped 0.5%. The US retail sales data, which came in worse than expected and showed a waning consumer, was summarily ignored. Indian equities also had a good day, with a 0.85% jump for the frontline indices.

The infection trends show no reduction in caseload in the US, which alone has 210k cases every day with close to 3000 deaths. Some EU countries such as Germany have been seeing another spike in cases, while France and Spain report a deceleration in case growth. Death counts remain elevated in Italy and the UK. Brazil is seeing another spike in deaths with close to 1000 fatalities a day. India is now firmly on a downward trajectory, with the positive test ratio falling below 2.5% consistently. The latest reports indicate 20k case growth, though the fatality count is still stuck around the 350 mark. If Kerala and Maharashtra show improvement in the coming weeks, and other states do not see any large spurt in cases, one can expect the positive test ratio to fall below 2% soon, which would reduce the active caseload dramatically. The next 2-3 weeks are critical for the trend.

USDINR range is solidifying well. Despite the 6.5 billion flow coming into India in December to date, the RBI seems firm in supporting USDINR. If not for the RBI, the global risk appetite might have pushed USDINR below 72 easily. Going into the year-end, the bias remains for INR appreciation. But, going by the RBI stance and the start of a falling trend in inflation, the bias is limited and the base case scenario is that of a range-bound INR.

USD INR views today (15/12/2020) around 8:00 am

INR likely to open around 73.70

USD remains under pressure, with DXY at 90.60 and EUR above 1.2150. US markets were negative yesterday on worries of continuing lockdowns into the festival season. Indian equities were positive, though, with a gain of 0.4% for the frontline indices. India CPI for November came in at 6.93%. The CPI finally has started to decelerate on easing food price inflation.  

Coronavirus infection trends remained the same, with the EU seeing a dip in cases, while the US reported a similar caseload as last week’s. India continues to report a consistent 350 deaths a day, despite the fact that new cases have fallen to 25k per day. The positive test ratio for yesterday remained at 3%. A positive aspect is that there are no large outbreaks yet even as we move into the winter peak. Vaccine distribution has already started across the world, and in the latest on vaccines, a large Russian vaccine trial is reported to have confirmed the 91% effectiveness of the vaccine. One can expect that the virus could cease to be an issue by the end of the 1st quarter of 2021 as vaccine intervention and rising temperatures can lead to a drastic reduction in the contagion.

INR range is holding well, as markets head into the year-end. This week is loaded with market-moving events and the FOMC meeting. PMIs and retail sales numbers are in focus. The US election has finally concluded, with Joe Biden getting elected by the electoral college. For now, the Dollar weakness trend globally seems to have more legs to go and INR is in a fairly safe zone. The bias is towards slight INR appreciation going into the year-end, but might not be enough to take the Rupee out of the current range.

USD INR views today (14/12/2020) around 8:00 am

INR likely to open around 73.70

USD weakness continues into the new week. DXY is lower, at 90.70, EUR is at 1.2130 and USDJPY is at 104.00. Equity futures indicate a positive start for markets. Hope around vaccines is keeping the risk trade going. The first set of vaccines are being deployed in various countries. The trend in infections remains intact, with the US suffering close to 3k deaths yesterday. India has reported <30k new cases and 330 deaths. The fatality count is decelerating gradually, but the positive test ratio is still stubborn around 3%. At the current pace, it might take until end-January for the virus to run out of steam. INR range is solidifying. This week has FOMC meeting, US retail sales, US and India CPI, among other data points. Over the next couple of months, markets would watch the impact of vaccines and news about any untoward incidents related to vaccine side-effects. A lot hinges on the hope that vaccines would take the world out of the pandemic permanently. For the next few days though, USDINR can be expected to meander within a range, reacting to headlines each day.[/et_pb_text][et_pb_text _builder_version="4.7.3" text_font="Open Sans||||||||" text_text_color="#000000" text_font_size="18px" text_line_height="1.8em" ol_line_height="2em" header_font="Open Sans||||||||" header_line_height="1.8em" header_2_font="Open Sans||||||||" header_2_text_color="#000000" header_2_font_size="32px" header_2_line_height="1.5em" text_line_height_tablet="" text_line_height_phone="1.5em" text_line_height_last_edited="on|phone" header_2_font_size_tablet="28px" header_2_font_size_phone="26px" header_2_font_size_last_edited="on|tablet"]

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

INR likely to open around 73.70/80

USDINR had yet another day of minimal movement. The Dollar is slightly stronger, as indicated by DXY moving above 91. EUR is trading at 1.2080 and USDJPY at 104.30. US tech index fell 2% on news of antitrust cases against Facebook, dragging the DOW by 0.3%. Sensex and Nifty were flat. Infections in the US rose by more than 210k and the fatality addition crossed 3k. While the EU has stabilized in both the number of new infections and the fatality count, the US continues to show a record jump in fatalities. Specific to India, new deaths came in below 350 and the overall positive test ratio has fallen to 3%, which is a good sign.

USDINR is consolidating again in the current range i.e. 73.20 – 74.00 become important resistance and support levels now. Our models are indicating low importer hedge ratios and signal change in momentum once the 74.20 level is seen on the upside. The Rupee is fairly balanced now and one can expect few more days of range-bound behavior.

USD INR views today (10/12/2020) around 8:00 am

INR likely to open around 73.80

USDINR remained within a tight range yesterday. USD is weaker globally, with EUR back at 1.2140 and DXY below 91. USDJPY is at 104. Equities fell yesterday, both in the US and India with around 0.2% and 0.4% fall respectively. US jobless claims came in closer to 850k – higher than expected – as lockdowns bite. Viral infections jumped by 620k and the number of deaths reached 12.5k across the world. The US alone had 2800 deaths. Brazil is seeing a sharp rise in cases again and Italy reported close to 850 deaths. The infection wave still has long legs, and even as markets ignore the impact of the virus, the damage to the economy due to the lockdowns continues to be very real.

INR range is very much intact and the realized volatility has been low over the past few days. While continuing Dollar weakness and global risk appetite are positive factors for the Rupee, the underlying stress in the global economy and continuing lockdowns are negative, as are the stupendous valuations of equity markets. For now, the positive and negative factors are balanced and the range could be expected to continue for a few more days.

 

INR likely to open around 73.70/80

USDINR had yet another day of minimal movement. The Dollar is slightly stronger, as indicated by DXY moving above 91. EUR is trading at 1.2080 and USDJPY at 104.30. US tech index fell 2% on news of antitrust cases against Facebook, dragging the DOW by 0.3%. Sensex and Nifty were flat. Infections in the US rose by more than 210k and the fatality addition crossed 3k. While the EU has stabilized in both the number of new infections and the fatality count, the US continues to show a record jump in fatalities. Specific to India, new deaths came in below 350 and the overall positive test ratio has fallen to 3%, which is a good sign.

USDINR is consolidating again in the current range i.e. 73.20 – 74.00 become important resistance and support levels now. Our models are indicating low importer hedge ratios and signal change in momentum once the 74.20 level is seen on the upside. The Rupee is fairly balanced now and one can expect few more days of range-bound behavior.

USD INR views today (09/12/2020) around 8:00 am

INR likely to open around 73.70/80

The range-bound move continued for yet another day yesterday. INR managed slight intra-day strength but gave it back. USD is slightly stronger, as indicated by DXY trading at 90.95. EUR is flat around 1.2110. US equities had another green day with a 0.3% gain on hopes of an economic stimulus bill and vaccine news, and Indian equities also gained 0.4% odd.

The number of new infections stood around 580k yesterday, but the fatality count continues to be high, led by the US with 2800 deaths. Indian numbers continue to improve, with the positive test ratio now close to 3%. The number of new fatalities also is now trending towards the 400 mark consistently. As of now, there seems to be no large break-out outside of Delhi and a couple of other states, despite winter temperatures dropping.

INR is set for another day within the range. With no significant market data in focus, the Rupee is purely flow-driven now and is dependent on whether RBI lets go on a given day. For now, the range remains between 74 and 73.20.

USD INR views today (08/12/2020) around 8:00 am

INR likely to open around 73.80

The Dollar traded slightly higher yesterday, as equity markets in the US saw a mild fall. DXY is at 90.85 and EUR is at 1.2110. US equities fell around 0.3%. The Rupee moved in a tight range even as Indian markets jumped by 0.75%. The number of infections saw a dip due to the weekend effect, but lockdown restrictions are expected to continue until the year-end in the US and some EU countries. India reported just 26k new cases and <400 deaths. The fatality count is slowly inching down slowly, but still at the July levels.

INR could meander in the range for yet another day today, as no major events/data are in focus. The Dollar has been hammered for the past few weeks, after the vaccine news. There could be a phase of consolidation of USD against crosses in the immediate term. But, given that INR has been in a range for the entire period, one can expect the Rupee to behave in the same way despite a potential for USD reversal. For now, the range for USDINR is between 73.20 and 74.00.

USD INR views today (07/12/2020) around 8:00 am

INR likely to open around 73.80

The Dollar remained flattish on Friday, after days of unrelenting weakness. DXY is at 90.80 and EUR is at 1.2125. Equities had another positive day and closed the week higher. US jobs data release showed that just 245k jobs were added, as against an expected addition of 470k. While the unemployment rate fell to 6.7%, the data shows that the momentum of job additions has all but stalled. With continuing lockdown restrictions, the prognosis is not good for the economy in the current and coming quarters. On the domestic front, the RBI MPC kept rates unchanged and maintained the stance as “accommodative”. Inflation continues to be a deterrent for further cuts, and even though the RBI forecasted lower inflation for the remainder of the year, it is still above the acceptable band below 6%. The policy did not have a material impact on the Rupee and was on expected lines.

The virus trends remain unchanged. While the total number of cases has dipped on a week-on-week basis, the fatality count remains elevated at 11k a day. India has been seeing a dip in cases, as Delhi is now firmly in a trend of deceleration. The positive test ratio for India has fallen below 3.5%, and the fatality figures have also been trending lower, though not yet commensurate with the reduced caseload. With vaccines in line for a January launch, the prognosis is good on the virus front, and unless there is an unexpected break-out in any area, the virus trends are no more as important for markets.

INR range remains intact, despite the ongoing Dollar weakness. It seems the RBI is back to supporting the Rupee, as the resultant INR liquidity injection is in line with the monetary policy stance. With most of the economic data out of the way for the month, only if the global Dollar weakness stalls could USDINR again test the upper end of the range. But, the Dollar weakness trend seems to have an unimpeded path as virus-related lockdowns put the Dollar at a disadvantage. The bias continues to be for a slightly stronger Rupee in the short-term, but within a range.

The Dollar remained flattish on Friday, after days of unrelenting weakness. DXY is at 90.80 and EUR is at 1.2125. Equities had another positive day and closed the week higher. US jobs data release showed that just 245k jobs were added, as against an expected addition of 470k. While the unemployment rate fell to 6.7%, the data shows that the momentum of job additions has all but stalled. With continuing lockdown restrictions, the prognosis is not good for the economy in the current and coming quarters. On the domestic front, the RBI MPC kept rates unchanged and maintained the stance as “accommodative”. Inflation continues to be a deterrent for further cuts, and even though the RBI forecasted lower inflation for the remainder of the year, it is still above the acceptable band below 6%. The policy did not have a material impact on the Rupee and was on expected lines.

The virus trends remain unchanged. While the total number of cases has dipped on a week-on-week basis, the fatality count remains elevated at 11k a day. India has been seeing a dip in cases, as Delhi is now firmly in a trend of deceleration. The positive test ratio for India has fallen below 3.5%, and the fatality figures have also been trending lower, though not yet commensurate with the reduced caseload. With vaccines in line for a January launch, the prognosis is good on the virus front, and unless there is an unexpected break-out in any area, the virus trends are no more as important for markets.

INR range remains intact, despite the ongoing Dollar weakness. It seems the RBI is back to supporting the Rupee, as the resultant INR liquidity injection is in line with the monetary policy stance. With most of the economic data out of the way for the month, only if the global Dollar weakness stalls could USDINR again test the upper end of the range. But, the Dollar weakness trend seems to have an unimpeded path as virus-related lockdowns put the Dollar at a disadvantage. The bias continues to be for a slightly stronger Rupee in the short-term, but within a range.

USD INR views today (04/12/2020) around 8:00 am

INR likely to open around 73.80

Even as the Dollar slide continued for yet another day yesterday, the rupee remained flat. Dollar Index has fallen to 90.65 and EUR is now close to 1.2150. US equities had mild gains but tempered by news that Pfizer slashed its projections for the number of vaccines it can manufacture by almost half.

The surge in new infections yesterday was higher than the usual trend. Around 660k new infections were reported across the globe, with the US alone reporting 215k. The death toll increased in the US, to around 2800. Italy is reaching close to 1000 deaths again. India had another day of close to 30k cases and the case fatality ratio is now below 3.5%, as Delhi is seeing improvement in caseload. Overall, it seems that the US infection is still in the process of peaking-out, while the EU story is slightly better, with the infection growth rate now slowing.

INR is now firmly in a range, and the momentum of a couple of days ago has disappeared despite the relentless pressure on USD. Today’s RBI policy is expected to maintain the status quo on rates, as inflation refuses to subside below the comfort zone for RBI. Markets would await today’s US jobs data to see the potential damage done by the new set of lockdown restrictions if any. INR is looking set for a range-bound behavior in a new range, as the RBI seems to be again holding the fort again in an environment of extreme Dollar weakness.

USD INR views today (03/12/2020) around 8:00 am

INR likely to open around 73.70/80

The Dollar is under relentless pressure and yesterday was another day of the same behavior. EUR has topped 1.21 and the DXY is now at 91.00. Despite the global backdrop of weak USD, the Rupee has failed to continue to the momentum towards 73.20 and is back towards the top end of the range. Equity markets across the world had a relatively quiet day. Markets are now hopeful of a new stimulus package agreement in the US congress. Now that the vaccine narrative is played out, markets would need a new trigger for moving to the next level.

The number of infections has been seeing a flattening process, but the fatality count is still in an upward trajectory. The US reported 2750 deaths yesterday, and the EU countries remain in the range of 600-800 a day. India also has been seeing a stubborn fatality count around the 500 mark, despite the fact that the positive test ratio is now trending towards 3.5% and below. For India, the good news is that the test ratio in Delhi is now falling, indicating a peak. Kerala and West Bengal continue to have a high positive ratio in the 8-10% range, while Maharashtra has reached <5% level. In all, India seems to be escaping a second wave of infection in most parts of the country.

The Rupee is being held from appreciation despite an extremely weak USD. US yields have been moving up in anticipation of large government spending in the coming days. Once the 10y crosses the 1% mark (now at 0.94%), risk assets might be under focus regarding their valuations, as the 10y yield tends to be the benchmark for asset valuation. A lot of macro data is yet to come out, but the initial trends seem to point out that the global economy in November has slipped from October level, but not as badly hit as expected. ADP payrolls came in lower than expected, and we have to watch for Friday’s jobs data, which is more crucial. Tomorrow’s RBI policy is unlikely to change the status quo and move the Rupee materially. It seems that the Rupee is looking to settle into a new range again between 74 and 73.20.  

USD INR views today (02/12/2020) around 8:00 am

INR likely to open around 73.50

The Rupee appreciated sharply yesterday on the back of relentless global Dollar weakness, and purportedly due to the RBI backing out from supporting INR. The Dollar was beaten down yesterday globally, with EUR reaching 1.2070 – a 2 year high. US equities were up on renewed stimulus and vaccination hopes. Indian markets were up more than 1% as relentless foreign flow keeps risk assets floating everywhere.

The number of infections continues to fall across the world week-on-week. But, the mortality has remained elevated and might need another 2-3 weeks to reverse direction. India reports 500 deaths for yet another day, and given that the new caseload has started to trend below 40k consistently, the fatality count is expected to start tapering soon. For markets, the virus and lockdown impact is all but insignificant now as the focus is firmly on the hopes of a potential reversal in the economy soon.

INR is now back to the erstwhile range between 73.20 and 74.00. The RBI paid a crucial role in keeping INR range-bound, despite close to 8 billion flow last month. If the RBI does stop the intervention amid the sharp Dollar weakness trend, 73.20 becomes very crucial for INR to break. The initial macro data releases such as PMIs have pointed out to a muted economy, but which has somehow weathered the November lockdowns. The bias is now towards some more INR appreciation due to the sheer momentum, and the short-term seems to be clearly favoring the Rupee unless the RBI again backs the Dollar.

USD INR views today (01/12/2020) around 8:00 am

INR likely to open around 73.90/74

The Dollar recouped some of the losses yesterday and the DXY is now back to around 92.00. EUR reached 1.20, but now lower at 1.1945. DOW fell close to 1%, but futures are up, indicating continuing risk appetite. India’s GDP fell 7.5% during Q2 FY 21, and the country is officially in a recession. While the fall in GDP is better than expected, the fact remains that equity markets remain completely disconnected from economic reality. More light would be thrown on the global economic backdrop this week.  The week is data-heavy, with a number of macro releases and central bank meetings lined up.

The infection seems to be slowing down in the EU, but the death toll and hospitalizations remain elevated. The US also is seeing peak hospitalizations, and one can expect the trend in fatalities also to peak in the next few weeks. But, lockdown restrictions continue to be implemented more stringently in states like California. India reported 31k cases yesterday, and <500 fatalities. The positive test ratio remains around 4%.  

The rupee could remain in a range for a few more days, awaiting macro data and the RBI monetary policy. This week as US ISM and jobs data, and economic releases such as EU retail sales among others. The narrative in markets is that the economic impact of lockdowns is temporary and the global economy would come roaring back in 2021, thus justifying the nosebleed valuations. The easy liquidity set-up is set to continue further. As per the latest comments from Powell, the outlook remains extremely uncertain – another way of saying that easy liquidity would continue for more time to come. At the peak of the financial crisis of 2008, the Fed purchased around 80 billion per month of new assets, while the current pace is 120 billion per month. With Janet Yellen as the incoming treasury secretary, easy money and fiscal spending are set to continue for a long time. For now, all risk assets are in a safe zone as risk appetite is extremely robust. One can expect more days of range-bound Rupee.

USD INR views today (27/11/2020) around 8:00 am

INR likely to open around 73.90

Yesterday was a US holiday. The Dollar is flat, with the Dollar Index trading just above 92. EUR is at 1.1920. Indian equities had a good run yesterday, gaining just shy of 1%. USDINR moved in a tight range waiting for direction on either side. No real change in infection trends was reported yesterday. The EU and the US remain subject to lockdown restrictions, while India reported a 45k odd case additon.

Today could be yet another day of muted movements in markets and subsequent material moves could come about next week when economic data releases pertaining to November would show the extent of the impact of lockdowns.

USD INR views today (26/11/2020) around 8:00 am

INR likely to open around 73.80

The relentless Dollar fall continued for yet another day, as vaccine hopes trumped every other negative effect. DXY is below 92 and EUR is around 1.1925. INR could break 74 convincingly, implying a new range now from 73.10 to 74. Equities took a breather from the surge yesterday. Dow fell 0.6%. Indian indices fell more than 1%.

The number of new fatalities shot up, even though the global new case additions plateaued around 600k. New deaths in the US rose to 2300 and to around 700 apiece in the EU countries. Lockdown restrictions continue to impact the economy in both the US and the EU countries. We have to wait for the December PMIs to gauge the impact. India remains at the 40-45k case ballpark with around 500 fatalities a day. The positive test ratio has been trending lower – now at 3.6%. Primary contributors to this ratio are Delhi and Kerala, which reported a 10% ratio of positive tests. Unless winter brings in a new wave of cases in other states, India is on track for a comfortable end to 2020 on the virus front.

INR is reacting to the Dollar weakness and unrelenting risk appetite in the face of economic adversity. Indian GDP is set to contract for yet another quarter (a technical recession), but the Rupee is stable owing to the fact that the current account deficit is set to shrink significantly for the year and due to the global flows. The short term looks good for INR, and the only risk now is a potential reversal of the USD weakness trend purely due to exhaustion.

USD INR views today (25/11/2020) around 8:00 am

INR likely to open around 74/74.10

The Dollar continues to be sold off on the back of strong risk appetite and the vaccine-related equity rally. DOW topped 30k yesterday. Indian equities had another 1%+ gain. DXY crashed to 92.15 with EUR now trading close to 1.19. The mountain of central bank liquidity has created two separate worlds – a. the markets, which are way above the previous all-time highs, and b. the economy, which is in one of the deepest slowdowns in history. For now, the Dollar is giving up fast, as liquidity continues to dominate economic reality.

Infections remain elevated across the world but have slowed down in the EU from the peak. The number of deaths continues to rise and can be expected to taper only in December. France, Italy, and the UK reported 600-800 deaths yesterday. The fatality count in the US is now above 2100 a day, though the case growth has stagnated. India continued to report 45k new infections and <500 deaths at a positive test ratio of <4%. The recovery rate has slightly fallen in India indicating that the active case growth might be reaching a bottom and also reflecting the recent surge in cases in Delhi and Kerala. All these facts are increasingly becoming irrelevant for the markets, as the complete focus is now on the vaccine-induced economic boom in 2021.

INR now has a chance to break the current range convincingly, given the drubbing USD has been receiving globally. Flows remain steady, at 6 billion+ for the month. But, the RBI has been accumulating reserves consistently, implying that the upside to the Rupee might not be as much as indicated by the global Dollar slide. If 74 is broken convincingly, USDINR would be back to the old range of 73.20 to 74.00. In all, exaggerated moves in the Rupee are unlikely, and the range-bound behavior is set to remain.

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

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.

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.