Daily Market Report: Thursday - November 8, 2012

The Indian Rupee opened weaker at 54.50 levels after closing yesterday at 54.20 levels. The Intraday range for the rupee is expected between 54.35-54.75 levels.

The Asian markets fell as investors worried about the fiscal crisis in the United States and the European economy's further deterioration, supporting the safe-haven currencies such as the yen and dollar.

The event to watch after the US election is now the China's Communist Party which gathers today to choose its fifth generation of leaders since taking power in 1949, a decision that will shape the nation's economic and financial policies for the next decade.

The dollar index rose to a two-month high against a basket of major currencies at 80.92 levels on Wednesday. The concern over US fiscal Cliff and ECB President Draghi highlighted Germany's slowdown supported the risk aversion sentiment.

The ECB President said that the disappointing German industrial production report suggests the economic slowdown has reached Germany also added pressure on the Euro. The Greek parliament will vote on further austerity today. The European Commission downgraded euro-area growth forecasts for 2012 and 2013 with a particularly sharp cut to German 2013 GDP growth. The EU reduced the growth forecasts for the Euro zone to -0.4% for 2012, and +0.1% for 2013.

The EC predicted 1.7% growth in Germany next year but now they are only looking for the Euro zone's largest economy to expand by only 0.8%. They also expect Spain to miss their budget forecast by a wide margin, increasing the need for a bailout.

The US treasury yields fell from 1.75% to 1.62% overnight and is currently trading at 1.67%. The Indian benchmark 10-year bond yield ended 1 bp higher at 8.19% as market participants await central bank's word on possible open market operations as well as key macroeconomic data next week.

Outlook: Exporters can sell near 54.70 plus levels only for long term partially (8-12 months only). The rupee is expected to be weak with some dips in between as we saw yesterday . Uncovered Importers were recommended to cover close to 54.00 - 54.10 levels yesterday . Overall USD/INR pair bullish as per our expectations.

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