On 28th Aug, 13 rupee made the all time low of 68.85. On this date RBI opened a swap window for oil marketing companies IOC, HPCL and BPCL to control their dollar buying from the market and also did heavy selling of dollar in the market. RBI also opened FCNR Deposit window on 4th Sept to attract foreign funds. These all the steps together pushed rupee to the substantial high of 60.93 on 18th Oct.
Now FCNR window will get close on 30th Nov. After that the swap window opened for oil marketing companies and better economic data can only appreciate rupee.
If we put economic results aside then the factor controlling rupee is the only one. Now the question is when RBI will close this window and where will we see rupee after this closure.
If RBI closes SWAP window for oil companies, rupee may again start depreciating. We know that if FED start tapering by the year end there will be heavy depreciation in INR. RBI may wait till the Fed take tapering decision because stimulus cut will depreciate rupee heavily and if RBI close the SWAP window during that time (tapering time) then it may not have significant impact on the currency as it(rupee) has already get discounted.
After November we may see rupee in the range of 63- 64.5. Fed decision will remain crucial for volatile rupee. Foreign fund outflow may also dip the currency if currency continues depreciation. All things depend on various factors we may see change in currency scenario in nearby weeks.
Recommended strategy USDINR:
Option strategy: Bull spread
Effect of FOMC minutes on various currencies:
INR opened depreciated today on FED taper talk. INR opened at 62.90. 0.35 depreciated from yesterday (20/11/13) close. INR had appreciated last week from 63.90 levels on global weakness of USD and RBI strong stand on INR depreciation. Better than expected export data also helped INR keeping appreciation track up to 62.
FED has indicated that asset purchase programme may be withdrawn. Fed has also indicated that this even after completion of asset purchase programme policy stand may remain soft for extended period of time, till job maket does not improve. Inflation is also below its long term target of 2%.
EUR depreciated slightly today to 1.3435. After minutes yesterday, speculation brought EUR down to this level from 1.3550. We do expect EUR to remain on depreciation track.
GBP has also depreciated to 1.6098 levels today. AUD is leading losing streak by depreciating up to 1%. Today BOJ completed its two day policy meet and end was well anticipated by market, no change in policy rate and continuation of loose monetary policy for extended period of time.
> Govt Actions: Nitin Gadkari, minister of road transport and Suresh Prabhu, railway minister at signing of MoU between IWAI and Dedicated Freight Corridor Corp. of India.
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>INR volatility index (monthly onshore) at 6.87. It has increased as INR started trading slightly appreciated.
>Asian Currencies: Asian currencies are appreciating. Appreciation led by KRW at 1.44% to 1113.68.
>OIL: Oil prices little down to $55.58, as US oil production is still increasing at predefined rate.
>Economic Events: FOMC statement reiterated that it is patient in increasing interest rates which led to deprecitaiton of USD world wide. Today we have US philly fed manufacturing index and unemployment claims.
> RBI poised to cut CRR before April 7 policy meet: SBI’s Ghosh
> India spectrum bids reach 1.08T rupees on day 13 of auction
>Global funds -4.57b rupees of local stocks; domestic funds -8.83b rupees yday: Provisional data from exchanges.
> Govt Actions: Indian parliament’s upper house will discuss the mines bill today. RBI to hold 11-day term repo auction for 210b rupees.
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>INR volatility index (monthly onshore) at 5.96.
>Asian Currencies: Asian currencies are Depreciating. Depreciation led by KRW at 0.41% to 1121.75.
>OIL: Oil prices little down to $54.67, as unprecedented glut in U.S. crude inventories.
>Economic Events: Today we do not have anything lined up for today except speeches from two governors of FED. Key factor will be increase in interest rates in US and pace of same. Any surprise on that side will bring lot of volatility.
> India spectrum bids reach 1.09t rupees on day 14 of sale
> India’s FM Jaitley says normal growth rate should be 8%-9%
>Global funds +14.3b rupees of local stocks; domestic funds +534.6m rupees yday: Provisional data from exchanges.
> Govt Actions: Govt may take decision on land acquisition bill today.
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>Asian Currencies: Asian currencies are MIX. Depreciation led by KRW at 0.16% to 1105.80. Depreciation is led by THB to 0.20% positive at 32.56.
>OIL: Oil prices slightly down to $47.37, as may fall further if Iran nuclear deal reached which may add to decrese in usage of oil.
>Economic Events: Today we have German IFO business climate in EURO region and in US we have core durable sales which may not affect markets significantly.
> Recent rains and hailstorm in different parts of the country had damaged Rabi crops in about 181 lakh hectares of land across 13 states during February 28-March 16.
> Prices of vegetables and pulses are spiralling upwards relentlessly, despite a bountiful winter crop.
>Global funds +737 crore rupees of local stocks; domestic funds -631 crore rupees yday: Provisional data from exchanges.
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