DAILY MARKET COMMENTARY: Monday - February 11, 2013

The Indian Rupee opened at 53.63 levels after closing at 53.50 levels last week. The rupee fell last week as the Euro fell from highs. The Weak GDP growth estimates for India also weighed on the rupee. The Intraday range for the rupee is seen...

DAILY MARKET COMMENTARY: Monday - February 11, 2013

The Indian Rupee opened at 53.63 levels after closing at 53.50 levels last week. The rupee fell last week as the Euro fell from highs. The Weak GDP growth estimates for India also weighed on the rupee. The Intraday range for the rupee is seen between 53.50 – 53.85 levels.

So far in 2013, the rupee has been the second best performer in Asia driven mainly by foreign fund inflows into Indian stocks which have already crossed $7 billion. The investment by overseas investors into Indian stock market since the beginning of 2013 has crossed USD 7 billion mark, out of which more than USD 3 billion were pumped in the month of February.

The weaker than expected GDP growth forecast for 2012-13 that was released by the CSO (Central Statistical Office). They said the country could grow to its slowest in a decade and could be much worse than earlier projections.             

On the other hand, according to Finance Minister the Indian economy will grow by 5.5% this fiscal year and 6-7% in the next fiscal year, as economy shows sign of reviving.

Event for the day, India is due to release the country's merchandise trade data for January today. The Indian government plans to cut its fertiliser subsidy bill by at least 15% for the fiscal year 2013-14 with no additional borrowing this fiscal year to keep the fiscal deficit at 5.3% of GDP.

With the Lunar New Year holiday shutting most Asian financial centres, including those in Japan, China, Hong Kong, Singapore and South Korea the trading activity is expected to be light. The Euro is trading lower as there are growing worries about Spain as a scandal on secret cash payments engulfs the prime minister, while confidence in Italy has been shaken in the run-up to a February 24-25 election. We expect the euro's upside likely to be limited and short-lived as the up-coming events will keep it under pressure.

The US 10 year Treasury yield is trading flat at 1.95%. The Indian Federal 10 year bond yield closed 4 bps lower at 7.84% than the previous close of 7.88%.

Outlook: As suggested earlier, exporter should wait to initiate exports covers till 53.90-54.00 levels at least. In case they cover they should only look at long term covers over 9-12 months where premiums are almost all time high. We had suggested for importers to cover their imports below 53.50 with a final stoploss of 53.50 which has already been breached. OVERALL: USD/INR pair still maintains bullish.

EUR/USD:  The Euro is trading at 1.3373 levels against the US dollar. The Euro’s appreciation was slashed out by the ECB’s concern over the Euro’s strength against the US dollar. The Euro zone is seen facing a political uncertainty amid economy slowdown signs from France.  These indicators will continue to weigh down the euro gains against the US dollar. The near term support is at 1.3308 and resistance is at 1.3680.

GBP/USD: The British Pound recovered strongly and is trading at 1.5803 against the US Dollar. The Sterling recovered 2.5% against the Euro and nearly 1% against the US Dollar. There were improvements in economic data with service sector activity and industrial production rising and the trade balance narrowing. At the same time political trouble in Spain and upcoming elections in Italy showed some threat to stability in Euro zone which led some profit taking in EUR/GBP. The support is near 1.5624 levels and the resistance is near 1.5845 levels.

AUD/USD: The Australian Dollar currently is trading at 1.0307 levels which is its four month low. The commodity currency is trading in a very thin range after mixed data from Chinese economy. The trade balance figures which came in positive whereas Consumer Price Index which came in negative at 2.0% failed to impact the AUD. The near term support is seen at 1.0237 levels while immediate resistance is at 1.0423 levels.

USD/JPY:  The Yen is gaining against the US dollar and is currently trading at 92.50 levels. The yen is seen correcting its course of depreciation against the US dollar. The Japanese Finance Minister has voiced the concerns over the currency slide in past 12 weeks which halted the yen depreciation.  The near term support is seen at 90.00 and resistance is at 94.90.

Gold:  Gold was trading at $1667 per ounce. The gold prices are seen consolidating in the range of $1660-$1685 levels since last two weeks. The gains in the global equity markets are restricting the gains in gold prices. The gold prices are seen trading lower as equities are turning favourable.  The near term support is at $ 1662 levels whereas resistance is seen at $ 1683 levels.

Crude oil:  The crude oil is seen trading at 95.71 levels. The crude oil prices are trading slightly lower as there is an excessive supply at Cushing, Oklahoma - the delivery point for the U.S. contract. On Indian front, the latest report showed that the crude oil production from the fields of the state-owned Oil and Natural Gas Corp. Ltd (ONGC) and Oil India Ltd dropped 5.4% and 1.6%, respectively, in the April-December period. The near term support is at 93.60 and resistance is at 98.20 levels.

Dollar Index: The US Dollar Index is trading higher at 80.17 levels. The US dollar index is trading near its one month high against its majors. It is supported by the positive economic reports and the latest weakness in Euro. The recent report showed that the trade deficit of the US narrowed in the month of December to $38.5B from $48.6B in the last month. Exports increased 2.1% thanks to a sharp improvement in petroleum while imports dropped 2.7%.   The Support is seen near 78.90 and resistance is at 80.87 levels.

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

Monday, February 11, 2013