INR Weekly

INR Weekly
November 9, 2009
USDINR (spot) : Rs.46.81/$
USDINR (Nov. Futures): Rs.46.85/$


Fundamental Analysis
Dollar traded in a range this week amid high volatility as equity markets showed signals of bottoming out.  Dollar futures which opened the week at Rs.47/USD and went on to make a high of 47.50 eventually closed the week at Rs.46.89/USD. Apart from volatile equity markets, the Central Bank policy meetings of U.S and U.K also played a key role in increasing currency volatility. Better than expected domestic trade data did not had any significant impact on the pair.

USDINR & Nifty –
 The Relationship is Back The cascading effect of the high volatility in the capital markets was seen in  USDINR pair as well. Nifty opened the week at 4722 and made a low of 4542 points and went on to make a high of 4843 points later in the week. Volatility indicators also increased with daily Average True Range in Nifty rising to 108 points from 80 points the previous week while implied volatility indicated that the high volatility scenario will continue. Apart from this the trendless nature of the market has also been a concern. The equity markets have been falling for two weeks now and it is too early to predict whether the movement in last 3 days is a trend change or correction


India’s Trade Data – 
Something To Cheer About India’s exports fot the month of September declined the least this year as Economic recovery in the U.S. and Europe boosted demand. Exports dropped 13.8% in September from a year earlier to $13.6 billion after sliding 19.4% in August Imports fell 31.3 percent to $21.4 billion in
September after declining 32.4 percent in August. The trade deficit narrowed to $7.8 billion from $8.4 billion in the previous month, which we feel will continue to narrow further towards Dec-09.


Conclusion
For the coming days we expect Dollar to derive its trend from Equity markets. Further weakness in equity market will lead to a rising Dollar, however the upside will be limited to Rs.47.60/USD while a rising equity markets will take the pair towards Rs.46.45/USD. Breach of either levels will lead to start of a new trend in the pair. Speaking of Economic data, the Industrial production figures on 12th will be a key thing to watch, however its mpact on USDINR will be limited. We continue to anticipate a sideways market for
coming week.

USD/INR DAILY

Rupee

Dollar futures traded in a range bound manner on Friday as market awaited some key economic data to be released in United Sates. Near month futures opened the day at Rs.46.90/USD, 16 paisa down from previous close of Rs.47.06/USD and closed the day just 4 paisa down at Rs. 46.86/USD. Nifty traded in green with the index closing 30 points up at 4796 points.Unemployment rate of U.S came higher than expected raising serious concerns for the government as well as the Federal Reserve. The unemployment Rate jumped to 10.2%, the highest level since 1983 against 9.8% in September. Non Farm Payrolls fell by 1,90,00 against prior expectation of 1,75,000. Although dollar index remained un‐affected after the release of this data, American bond yields fell on anticipation that Federal Reserve will continue with its regime of lower interest rates for an extended period of time. In domestic news Prime Minister Manmohan Singh stated that India will “wind” down fiscal stimulus from 2010 as economy showed signals of recovery. For intraday we expect a flat opening of USDINR, however 46.65 will be acting as crucial support for the pair.



                       Pivot           Support 1    Support    2 Resistance 1     Resistance 2
Spot                 46.8133     46.7367    46.6583    46.8917               46.9683
Nov. Future      46.8542    46.7758    46.6917    46.9383                47.0167