DAILY MARKET REPORT: Tuesday - January 15, 2013.
The Indian Rupee opened at 54.37 levels after closing yesterday at 54.50 levels. The Intraday range for the rupee is seen between 54.20 - 54.65 levels. The India's headline inflation slowed to 7.18% in the month of December, increasing the...
The Indian Rupee opened at 54.37 levels after closing yesterday at 54.50 levels. The Intraday range for the rupee is seen between 54.20 - 54.65 levels.
The India's headline inflation slowed to 7.18% in the month of December, increasing the expectations for an interest rate cut by the central bank later this month to stimulate the economy.
Following the increased expectation, the financial markets rallied. The rupee was seen appreciating after the Finance Ministry delayed the implementation of controversial rules on tax avoidance to 2016. The delay in GAAR is expected to boost up the flows in the local equity market; the FII’s has already pumped in more than $1.5 billion so far in 2013 after investing $24.55 billion in 2012.
Some consolidation could be seen in rupee ahead of the RBI policy review, but still we believe pressure would continue to exert on rupee as the inflation still stays above 7% with bolstering current account deficit.
The Reserve Bank of India has announced to open a special window to provide exporters with dollar credit by allowing banks to borrow dollars directly from the central bank under a swap facility. Banks will buy dollars from the RBI for tenures of 3 or 6 months, up to a combined total of $6.5 billion, with each having specific limit of how much it can borrow at a rate decided by the central bank.
The Asian markets are trading higher as yen hovered near its 2-1/2 year low against the dollar on Tuesday, bolstering Japanese shares to multi-year highs on expectations for more aggressive monetary easing from the Bank of Japan.
The important event that was eyed by the investors was FED Chairman Ben Bernanke’s speech. The Fed Chairman talked evenly about the gradual improvements in the U.S. economy but also expressed concerns that growth isn't strong enough and the labour market. He also admitted that the Fed must be vigilant toward asset price bubbles, sending mixed signals to the markets.
Meanwhile concerns over debt ceiling are back on the table. After narrowly avoiding the "fiscal cliff" of sharp spending cuts and tax increases just two weeks ago, Obama faces a set of deadlines by the end of February: the need to raise the debt ceiling.
The US 10 year Treasury yield is trading lower at 1.84%. The Indian Federal bond yield closed at 7.87%.
OUTLOOK: Exporters wait for 55 plus levels to cover. While the Importers should make the most of the dips coming in the market and cover their open exposures at around 54.20 - 54.40 levels. OVERALL: USD/INR: Bullish
EURUSD: The Euro is trading higher at 1.3377 levels against the US dollar. The euro rose above 1.3400 levels against the US dollar yesterday but could not sustain the gains for long on account of poor economic data. . Manufacturing activity in the Euro zone dropped 0.3% in the month of November. Last week ECB commented that the economy is slowly growing and there is no need right now to make any changes in the monetary policy. However, if the economic data continues to come out weaker, then it will be a threat to the Euro. Euro zone trade figures are scheduled for release today and it is expected that the surplus will increase. Support is at 1.3175 and resistance is at 1.3560.
GBP/USD: The Pound is trading at 1.6089 levels against the US Dollar. The pound is trading slightly lower against the US dollar. The latest UK trade data showed that the deficit actually declined modestly in December to £9.2 billion, from £9.5 billion the previous month, due to a small gain in exports. The events scheduled for the day are BOE Governor speech and BOE inflation. The pair is expected to find a support near 1.5990 levels and the resistance is near 1.6180 levels. Overall in a range with bearish bias.
USDJPY: The Yen is trading lower at 89.00 levels. The Yen dropped to its lowest level since June 2010 against the dollar and it’s lowest since May 2011 against the euro. During the weekend, the Prime Minister expressed his desire to replace the BOJ governor Shirakawa with someone who can consider the bold monetary policy. The prospect of more aggressive monetary policy by the Bank of Japan this year continues to be the primary driver behind yen weakness. Support is at 86.85 and resistance is at 91.10.
AUD/USD:Australian dollar is trading at 1.0552 levels against the US Dollar. The AUD is trading flat against the US dollar ahead of the important data to be released this week. The jobs report is likely to show an increase in the unemployment rate. Near term support is seen at 1.0500 levels while immediate resistance is at 1.0627 levels.
Gold: The Gold is trading stronger at $1672 levels. The Gold rebounded from a one week low of $1625 levels on strong demand from investors. The near term support is seen at $1665 levels whereas resistance is seen at $1680 levels.
Crude oil: The crude oil is trading at 94.01 levels. The rise in the crude prices is boosted by a weak U.S. dollar. it was also led by the hopes that China’s economic recovery was gaining momentum. China is the world's second largest oil consumer after the U.S. and has been the engine of strengthening demand. Support is near 92.80 and resistance is at 95.80 levels.
Dollar Index: The US dollar index is trading lower at 79.45 levels. The strong statement by President Draghi stating recovery in the Euro Zone led to recovery in the Euro. The Federal Reserve suggested that the central bank was in no hurry to withdraw monetary stimulus from the world's biggest economy. The Federal Reserve chairman Ben Bernanke also urged the US lawmakers to increase the borrowing limit to avoid the debt default. Support is near 78.99 and resistance is at 80.67 levels
(Source: Corporate Communications, India Forex Advisors Pvt. Ltd.)