Daily Market Commentary: Friday, September 7, 2012

Domestic and International Highlights:

 The Indian Rupee opened at 55.53 levels against the dollar after closing yesterday at 55.66 levels. The rupee was seen breaching 56 mark yesterday but corrected aggressively in the last 30 minutes of the day. The intraday range for the rupee is expected between 55.35-55.60 levels.

 The Asian stock markets gained after the ECB announced an unlimited bond-buying program to reduce the borrowing costs for the region's most indebted nations, boosting demand for riskier assets.

 The ECB President Mario Draghi yesterday said policy makers agreed to an unlimited bond-purchase program as they try to regain control of interest rates in the Euro area. The program will target sovereign bonds with maturities of one to three years in its most ambitious plan yet to save the Euro. The Euro-area gross domestic product is expected to drop down to 0.4% this year compared with an earlier projection of 0.1%.

 The International Monetary Fund on Thursday also supported the European Central Bank's decision and said it was prepared to cooperate as much as it can.

 The Euro continues to trade stable above 1.26 levels while Dollar index little changed at 81.12 levels.

 The US 10 year treasury yield is trading higher at 1.68% reflecting growing risk appetite in global markets. The Indian bond yields fell to their lowest in nearly a month on Thursday, helped by adequate cash in the banking system. The benchmark 10-year bond yield ended 2 bps lower at 8 .16%.

 Outlook: The Indian Rupee is still stuck in a range of 55 - 56 levels with a weaker bias. We expect a breakout anytime soon.

(Source: Corporate Communications Team, India Forex Advisors Pvt. Ltd.)