Currency Update - Nov 17, 2020 - Reliance Securities

Mr. Sriram Iyer, Senior Research Analyst at Reliance Securities

The Indian Rupee ended flat on Friday, however, for the week the currency depreciated against the U.S. Dollar amid as persistent dollar purchases from state-run banks, likely on behalf of the central bank.

The Rupee ended at 74.60 to the dollar compared with 74.65 in the previous session. For the week, the rupee depreciated by 0.5%.

The U.S Dollar Index is trading weak this Friday afternoon trade, while most of the Asian currencies were stronger against the U.S. Dollar and lent support this Friday.

However, risk appetite waned as a gloomy global economic outlook dampened sentiment due to rising COVID-19 infections in the U.S. and Europe and kept appreciation bias limited.

The one-year forward premium was at 3.06 rupees, against 3.04 rupees in the previous session.

Indian financial markets were closed on November 16 for a local holiday.

Meanwhile, India's wholesale price inflation rate in October climbed 1.48% on year in October, lagging a median forecast of a 1.6% annual expansion according to a Reuters poll of economists, but faster than previous month's 1.32% rise.

The benchmark BSE Sensex and the broader NSE index ended 0.20% and 0.23% higher, respectively, in a choppy trading session on Friday.

The benchmark 5.77% bond maturing in 2030 ended at 99.19 rupees, yielding 5.88%, against 99.01 rupees and 5.90% yield on Thursday.

Meanwhile, according to data from the Reserve Bank of India (RBI), the country's foreign exchange reserves rose for the sixth straight week to hit a fresh record high of $568.49 billion for the week ending Nov. 6, from $560.72 billion in the prior week.

The reserves rose by $7.77 billion last week, the biggest jump since week ended Jul. 31.

The rise was mainly due to an increase in foreign currency assets that stood at $524.74 billion from $518.34 billion in the previous week.

The U.S. Dollar Index ended lower on Monday as safe haven appeal for the Greenback reduced after Moderna Inc became the second U.S. company in a week to report positive results from its COVID-19 vaccine trial.

The Euro inched higher on Monday, as investors began the week in a relatively upbeat mood after strong economic data from Asia and on hopes for a successful vaccine against COVID-19.

The Sterling slipped back below $1.320 on Monday, even as global risk appetite started the week on a high, as traders focused on Brexit negotiations that resumed in Brussels.

The Japanese yen appreciated against the U.S. Dollar on Monday on broad Greenback weakness.

OUTLOOK - DOMESTIC & INTERNATIONAL CURRENCY

The Indian Rupee could start this Tuesday on a positive note against the Greenback as the U.S. Dollar falls amid improved risk appetite in the global markets supported by fresh vaccine news.

The Rupee could likely open around 74.30-74.35 per dollar compared with 74.60 at close on Friday.

Meanwhile, NDF is at 74.35/74.36 this Tuesday morning.

However, RBI will continue to mop up fund inflows and could limit appreciation.

Most of the Asian currencies have started stronger this Tuesday and will lift sentiments.

Technically, USDINR Spot pair ended near 200-DMA at 74.53 levels, while 74.75 remained a hurdle. However above 74.35 indicating for sideways to marginal upside momentum. Resistance is at 74.75- 74.88 & Support is at 74.35-74.20 levels. USDINR Spot is expected to trade in a range of 74.25-74.80 levels.

Source : Equity Bulls

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