Monday, 06 April 2015 06:02

Rupee may depreciate from 62-62.10

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Rupee opens high on 62.12 after closing low last week on 62.32. Rupee may start depreciating as U.S. data have shown stronger than expected results.

On Friday Bureau of Labor Statistics posted 251k increase in jobs in Dec, lower than Nov reading of 353k but better than expectation of 241k. Unemployment Rate has also fell to 5.6% from last 5.8% that also shows strong labor market condition. Positive readings weigh well on Feds interest rate decision.

Historically it is observed that after better labor market data rupee depreciates but due to heavy inflow in debt and equity market the currency has got strong support. After a bit fall in the pace of inflow rupee may start depreciating gradually.

Today India is to release CPI (yoy) and Industrial Production (Nov) data after market hours. Last year, because of base effect we were getting very low readings of inflation. This month the scenario has changed as the base year has changed. CPI is expected to come at 5.4% from last 4.38%. Industrial Production which fell unexpectedly to -4.2% in Oct may show improvement in Nov at 2.2%.

Rupee is already overvalued and its appreciation with just the foreign fund inflow and less change in fundamentals suggests that the rally may not last long. Month end FOMC meet and expectation of Feds interest rate hike may weaken emerging market currencies in advance.

We are expecting buying near to level 62-62.10


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