The Indian rupee, a crucial currency in the global financial landscape, has been making waves in the currency markets with its performance on Monday, June 26. As we delve into the pre-market updates and expectations for June 27, 2023, it is essential to examine the rupee’s performance against four major currencies: the US dollar (USD), the Euro (EUR), the Japanese yen (JPY), and the British pound (GBP). Traders and investors keenly observe the movements of these currency pairs as they provide valuable insights into the Indian economy’s strength and global market trends.
Let us explore the events and factors influencing the rupee’s trajectory, providing a comprehensive overview of the currency’s performance on the previous day and offering insights into what lies ahead.
USDINR
The currency market, particularly the dynamics of USDINR (the exchange rate of the US Dollar to the Indian Rupee), is currently reflecting a prevailing risk-on sentiment in Asian stock markets. This sentiment means that investors are leaning towards more aggressive investments in the market, which are typically riskier but can potentially yield higher returns. Simultaneously, the US Dollar Index, a measure of the value of the US dollar relative to a basket of foreign currencies, is gradually diminishing.
In this context, USDINR is trading at relatively subdued levels, specifically around the 81.96/97 region on the offshore spot reference, where the exchange rate for immediate delivery is determined. Over the recent period, USDINR has been moving within a somewhat narrow band, oscillating between 81.85 and 82.20. Should the exchange rate manage to fall below the lower bound of this range (81.85), we might observe a subsequent retest of the support level at 81.60/65. This specific level has demonstrated resilience since March of the current year, consistently providing a floor for the price.
Despite the potential benefits the Indian Rupee could reap from the inflow related to Initial Public Offerings (IPOs), the necessary speculation-driven pressure is still required to help USDINR make a significant downward break, penetrating the robust support near 81.60.
For traders employing the scalping strategy — a trading strategy where one aims to profit from small price changes — the current situation suggests trading within the aforementioned range of 81.85 and 82.20. This involves purchasing at the lower limit and offloading at the upper limit. However, if the range is disrupted, it becomes paramount for traders to swiftly adjust their positions in response to the new trend. The same applies to sellers of options strategies such as straddles and strangles, who should respond promptly if the current range is surpassed.
GBPINR
Moving on to GBPINR (the exchange rate of the British Pound to the Indian Rupee), there are no specific data triggers this week. Consequently, the pair’s movement is likely to be influenced by the general risk sentiment in the market and the progression of the US Dollar Index. GBPINR has demonstrated strong support around the 104.00 level and further at the 103.60/70 levels in the spot market.
The current bias towards an upward trajectory remains intact as long as the GBPINR rates hover above these levels. Noteworthy for the upcoming week is the speech by the Bank of England governor scheduled for Wednesday. Should the governor adopt a hawkish tone, indicating a possible tightening of monetary policy, it could act as a catalyst, pushing the GBPINR exchange rate higher.
EURINR
The IFO figures out of Germany have indicated a drop in business confidence for the second consecutive month in June. The less-than-expected economic rebound of China posts stringent COVID-19 restrictions, apprehensions about the deceleration of the US economy, along with continued tightening of monetary policy are all placing strain on the business outlook in Germany. Despite the disappointing IFO statistics, the EURUSD seemed to overlook this, showing an upward trend. For today, it is expected that the EURINR may face hurdles around the 89.80/90.00 levels in the spot market, whereas it may find a support cushion near the 89.30/40 levels.
JPYINR
The INR has exhibited fluctuating performance against the JPY segment, with a bias rate of 57.50-59.95. Traders and investors closely monitor the currency’s movements for potential opportunities and risks. Today, Shunichi Suzuki, the Finance Minister of Japan, noted the substantial and irregular swings in the currency market. He underscored the importance of steady currency fluctuations that genuinely represent economic fundamentals. Although there has been an uptick in verbal interventions, traders do not currently foresee a significant risk of the Yen being sold off. However, these comments may serve to slow down the rate of JPY depreciation. Our tendency remains bearish.
Key Points to Note
Friday saw a downturn in U.S. stocks, marking the most significant weekly slump since Silicon Valley Bank’s collapse in March, hinting that the three-month surge could be nearing its end. The S&P 500 index recorded a 1.4% decrease for the week, ending a five-week growth streak and marking its most significant weekly fall since March 10, 2023. The Dow industrials and the Nasdaq experienced a drop of 1.7% and 1.4%, respectively, ending an eight-week growth streak for the latter. This concluded the Nasdaq Composite’s longest stretch of weekly increases since March 2019.
As a response to the wave of interest-rate hikes and stern remarks from international central bankers reviving concerns about global economic growth, investors opted for the safety of bonds and the U.S. dollar. Global equities felt the impact of these concerns, particularly following rate hikes in the U.K., Switzerland, Norway, and Turkey on Thursday.
The S&P Global U.S. services index dipped to 54.1 in June from 54.9 in the previous month, marking a two-month low. Meanwhile, the manufacturing index plunged to a five-month low of 46.3, down from 48.4 in May.
Bitcoin recorded its highest value in a year, following spot bitcoin exchange-traded fund applications filed by financial giants BlackRock, Invesco, and WisdomTree. Bitcoin’s value floated just over $31,000 in the early afternoon and ultimately settled at $30,856. This represents its highest level since June 8, 2022, when it traded at an intraday high of $31,515.49.
Euro zone government bond yields dropped in response to a significant slowdown in German business activity in June, as reported by purchasing managers indexes (PMI), and the contraction of French business activity for the first time in five months.
Investors are apprehensive, as they grapple with the repercussions of the short-lived coup attempt by the mercenary Wagner Group, leaving Russian President Vladimir Putin in a weakened state. Although a diminished Russia hints at a promising future for Ukraine, the possibility of ongoing internal conflict in the world’s largest nuclear-armed nation is cause for concern. Despite apparent de-escalation in Russia, investors may remain wary of potential ensuing instability.
Global markets seemed relatively stable on Monday following the geopolitical upheaval in Russia, with Asia-Pacific markets showing a mixed start to the final week of June.
The Nifty index dropped for the second consecutive session on June 23, pulled down by negative global indicators. It ended with a decrease of 0.56% or 105.8 points at 18665.5. A bearish Dark Cloud Cover pattern formed on the Nifty’s weekly charts after a 0.85% fall over the week. A swift recovery and surpassing the all-time high might be challenging in the short term. The Nifty could find support in the 18459-18555 range, while 18795 could offer resistance to upward movement in the near future.
Disclaimer
The information provided by CurrencyVeda is solely for educational purposes and should not be considered financial advice. We recommend readers to conduct their own research or consult with a financial advisor before making any investment decisions. CurrencyVeda assumes no liability for losses incurred based on the information provided.
