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Daily Morning Update :Global market and USDINR

Written by QuantArt Market

Forex Hedging | 10 min Read
Best Hedging Strategy For Importers, import port

USD INR view today (29/10/2020)

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Based on our view, INR likely to open around 74.20

Dow fell approximately 3.5% yesterday. European indices were all down between 2.5% to 4.0%. 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 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.

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