Daily Morning Update: Global Markets and USDINR (Year 2020)

Best Hedging Strategy For Importers, import port

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.

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.

 

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