USDINR
Happy Monday, USDINR is most likely to commence the start of the week within the range of 79.85 – 79.95 levels ahead of the FED interest rate decision this week.
The local currency is the third-worst performer in Asia in the past month, weakening beyond 80 a dollar amid rising interest rates in the US and risk-off sentiment. Investors continued pulling out of domestic equities during the period, taking the total outflows to almost $29 billion this year.
India’s trade deficit hit record levels in the past two months driven by the highest monthly import bill of more than $60 billion. That’s unlikely to be offset by exports as global growth loses steam due to fears of recession. For the South Asian nation’s exporters as well, a weak currency is doing little to improve competitiveness as other currencies are also falling in tandem.
Pricey imports, due to higher global energy prices and a falling rupee, could further widen the current account gap -- the broadest measure of external finances -- to its highest level in a decade to over 3% of gross domestic product in the fiscal year ending March.
The nation’s status as one of the world’s biggest energy importers makes it vulnerable to global price shocks as well as currency volatility. A 5% fall in the rupee pushes up inflation by about 20 basis points, according to a study by the Reserve Bank of India.
THE FOMC
Coming Wednesday, the interest rate decision by the Fed is expected to elevate its interest rates to 2.5%. A rate hike announcement by 75 bps by Fed chair J.Powell to combat the inflation monster may support the greenback.
Earlier, expectations were soaring for a 1% rate hike as inventors saw price pressures reaching a double-digit figure. However, a downward shift in long-run inflation expectations to 2.8% vs. June print of 3.1% and a dismal second-quarter earnings show on Wall Street have forced the Fed not to pick up a galloping pace.
THE BOJ
The Bank of Japan remained worried as oil and food prices were keeping the inflation rate above 2%. Now, a recovery in demand for durable goods is going to delight the BOJ policymakers amid an overall recovery.
In spite of higher core CPI in Japan, expectations of a hawkish commentary from BOJ Governor Haruhiko Kuroda have no relevance. The BOJ will continue with its dovish commentary and will keep flushing money into the economy.
USDINR TECHNICAL
Day Trend: - BUY ON DIP (Short Term)
Weekly Trend: - HOLD
INTRADAY RANGE – 79.99 (79.91 – 79.84) 79.76
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