Rupee weakened for a second day as good demand for the greenback from importers and weakness in domestic shares through a large part of the day, as also in other Asian currencies, hurt sentiment. Traders will continue to monitor foreign fund flows into the debt and equity markets for near-term direction.
Foreign investors bought a net $826.9 million in debt markets on Friday, the highest singleday flows since Jan. 15, taking total inflows in 2014 to $9.43 billion. Total year-to-date flows in equities stand at $9.13 billion. Investors are also concerned about debt flows going ahead as foreign investors have nearly exhausted their available investment limit in government debt. Overseas investors used up 92.82 percent of the available debt limit, following which the National Stock Exchange said it will conduct an auction for 71.52 billion rupees ($1.21 billion) on Wednesday to allot the remaining unutilised limit.
The consumer price inflation data due on Thursday will be watched, though a large impact on the foreign exchange market is unlikely. The partially convertible rupee closed at 59.29/30 per dollar compared with its close of 59.20/21 on Monday. In the offshore non-deliverable forwards, the one-month contract was at 59.52 while the three-month was at 59.56.
Technically market is under fresh buying as market has witnessed gain in open interest by 0.92% to settled at 425642 while prices up 0.0925 rupee, now USDINR is getting support at 59.3 and below same could see a test of 59.1125 level, And resistance is now likely to be seen at 59.5875, a move above could see prices testing 59.6875.
MCX-SX EURINR Jun 2014
Euro seen under pressure as the latest measures by the European Central Bank to tackle low inflation continued to weigh. French industrial production recovered as expected in April underpinned by factory output, data from the statistical office Insee revealed. Industrial production grew 0.3 percent month-on-month in April, in line with forecast, reversing the 0.4 percent drop in March.
Borrowing costs in the peripheral euro zone have fallen sharply in the wake of the ECB’s decision last week to launch a package of measures to avert the threat of persistently low inflation in the euro area, widening the yields between some euro area government bonds and U.S. Treasuries. The ECB cut all its main rates to record lows on Thursday and for the first time imposed negative deposit rates on commercial lenders, in a bid to stimulate lending to businesses.
ECB President Mario Draghi also outlined a new long-term loan program for banks to promote lending to small and mid-sized businesses and kept the option of quantitative easing on the table. In contrast, the Fed is expected to start tightening monetary policy in the first half of next year, after its stimulus program winds up later this year.
Technically market is under long liquidation as market has witnessed drop in open interest by -15.32% to settled at 23343 while prices down -0.345 rupee, now EURINR is getting support at 80.285 and below same could see a test of 80.065 level, And resistance is now likely to be seen at 80.82, a move above could see prices testing 81.135.
MCX-SX GBPINR Jun 2014
GBP settled flat after data showed that manufacturing production in the U.K. rose for a third straight month in April, pushing the annual rate to a three year high. U.K. industrial production expanded at a faster pace in April, the Office for National Statistics said. Industrial output gained 0.4 percent in April from March, when it grew by revised 0.1 percent.
The increase in total production reflected increase of 0.4 percent in manufacturing, the fifth consecutive increase since November 2013. Manufacturing output growth also came in line with expectations. On a year-over-year basis manufacturing production rose 4.4% ahead of forecasts for a 4% increase. It was the largest annual increase in output since early 2011. Official data on the British labour market next week could confirm a UK recovery and reinforce expectations of rate hikes early next year.
Demand for the dollar continued to be underpinned after Friday’s nonfarm payrolls report showed that the U.S. economy added jobs for the fourth successive month in May, with employment returning to its pre-recession peak. On a yearly basis, industrial production grew 3 percent versus 2.5 percent in March. This was the eighth consecutive increase since August 2013. At the same time, manufacturing output advanced 4.4 percent.
Technically market is under long liquidation as market has witnessed drop in open interest by -10.9% to settled at 24439 while prices down -0.0175 rupee, now GBPINR is getting support at 99.55 and below same could see a test of 99.3625 level, And resistance is now likely to be seen at 99.9875, a move above could see prices testing 100.2375.
MCX-SX JPYINR Jun 2014
JPY seen supported on expectations that Bank of Japan was unlikely to ease its monetary policy further. Inflation and growth were on an upward trajectory preventing BOJ from further easing. Gross domestic product in the first quarter in Japan strengthened 1.6% from 0.2% a quarter earlier and above expectations of 1.4%. GDP also strengthened to 6.7% in the first quarter from 0.3% a year earlier and above forecasts of 5.6%. GDP in Japan improved on increased spending by the business sector which raised hopes that the economy may bounce-back despite a hike in consumption tax by the government.
The National Consumer Price index Inflation in Japan rose to 3.4% in Japan in April from 2.1% a month earlier and 1.6% year-on-year. BOJ which maintained asset purchases at 60-70 trillion yen and kept interest rates steady at 0.1% had also projected CPI to move above 1.25% for the year FY15. An index measuring tertiary industry activity in Japan plunged a seasonally adjusted 5.4 percent on month in April, the Ministry of Economy, Trade and Industry said on Tuesday, standing at 97.4.
Industries that saw activity move lower included wholesale and retail trade, finance, personal services, communications, utilities, real estate and learning support.
Technically market is under fresh buying as market has witnessed gain in open interest by 11.45% to settled at 6035 while prices up 0.1175 rupee, now JPYINR is getting support at 57.97 and below same could see a test of 57.8675 level, And resistance is now likely to be seen at 58.2025, a move above could see prices testing 58.3325