Monday, 06 April 2015 08:30

Rupee weakens above 62 on global cues and buying pressure

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Rupee crossed 62 level after a week as global equity markets tumbled after heavy fall in Greek equity market and Fitch Places Japan's 'A+' IDRs on Rating Watch Negative.

Rupee regained to 61.78 on last Friday as Govt sold 5% stake of Steel Authority of Indi Ltd (SAIL). The appreciation continued in INR on last two days as well even after better than expected reading of U.S. non-farm payroll. Dollar strengthened against major currencies after strong job data and reached near to four year high but INR did not depreciate much compare to its peers.

There was observed strong resistance or we can say selling near to 62.0 level but today the level is breached. Rupee made the high of 62.0488 after opening on 61.96. Now, lets look into the details.

Greek market fell more than 10% after the Government announcement to hold presidential election as early as on Dec 17 which was earlier scheduled in March. At present the Syriza party is leading early polls and expected to win. This party is against the IMF bailout program that might put the economy in disastrous condition and the market reaction was very clear.

Yesterday Fitch Places Japan's 'A+' IDRs on Rating Watch Negative (RWN) which has also caused anxiety in the market. The issue ratings on Japan's unsecured foreign and local currency bonds have also been placed on RWN, as has the sovereign's Short-term IDR of 'F1+. The rating agency has cited points of controlling fiscal deficit and managing debt to GDP ratio in the report.

China market also traded negative Tuesday tracking global markets. The Shanghai Composite Index closed down by 5.4% to 2856.27 points. Wall Street remained in loss on falling oil prices and dampening global market outlook. Thats why Indian markets closed negative by more than 1% yesterday.

Rupee may gain strength after the govt pass awaited bills in this winter session of parliament. Earlier the Govt decided to pass the Insurance bill by 12th Dec but it has extended dead line till next week. Industrialists are also waiting for the clearance of coal, power, infrastructure etc. bills. Govt is also expected to sale stake of ONGC, NHPC, Coal India and other public companies before the end of this fiscal year to achieve the budget deficit target of 4.5% of GDP. In coming weeks this may support INR. But the rupee range is expected to remain skewed towards depreciation.

We may see rupee within the range of 61.80 to 62.20 in near term looking at the present market scenario.

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