Date- July 03, 2023
Place- New Delhi, India
Welcome to our daily pre-market update, where we comprehensively analyze the Indian rupee’s performance in the currency markets. In this article, we will delve into the previous day’s trading session, examining the critical movements of the rupee against major currencies such as the US dollar (USD), British pound (GBP), Euro (EUR), and Japanese yen (JPY). Additionally, we will offer insights into what we can expect from the rupee in today’s trading session.
USDINR
Asian stock markets are rising in harmony with the stellar performance of US markets last Friday, and with the US Dollar Index feeling the squeeze, we foresee a potential slump in USDINR, targeting the 82.00 level at the current spot rate. Over the past fortnight, USDINR has held its ground within a narrow corridor of 81.85 to 82.20, with the bulk of transactions taking place in the tight space between 81.90 and 82.10—a mere 20 paise differential. Historically, such a dramatic shrinkage in realized volatility usually gives way to a temporary spike in intraday range, possibly kickstarting a brief trending phase. Should USDINR shatter the 81.85-82.20 boundary, it could set off a 25/30 paise swing in that direction.
USDINR’s implied volatilities across various timeframes have hit historic troughs. One-month volatility is suggestive of an average daily shift of 12/15 paise. Traders should keep their eyes on scalping trades, targeting daily price fluctuations of 4/7 paise. It might also be prudent to explore the use of short straddle or short strangle strategies, although this should be done with care. To counterbalance the potential risk of substantial losses from any surprise gap opening, it’s advisable to keep position sizes in check.
GBPINR
The last two weeks of June saw both GBPUSD and GBPINR undergo a close to 2% downward adjustment, perhaps spurred by profit-taking activities. Despite this, CFTC data reveals that speculators are still largely bullish on GBPUSD, though the recent correction might have introduced a sense of equilibrium.
In the world of macroeconomic developments, business sentiment in the UK soared to a 13-month high in June. This uplifting news follows five successive months of a steady climb in consumer confidence, as revealed by GfK’s comprehensive survey. With consumers and businesses gaining confidence, traders are betting on the Bank of England (BOE) to adopt a more assertive stance in hiking rates to combat persistent and obstinate inflation.
As a result of these expectations, UK sovereign bond yields have rocketed to levels unseen since June 2008. The UK money market is bracing for the BOE to push rates up another 100 basis points, hitting the 6.00% mark. We, therefore, foresee GBPINR capitalizing on this hawkish mood and trading with an upward bias over the course of the week.
EURINR
US consumer spending saw a minor uptick of 0.1% in the recent month, a drop-off from the 0.4% increase witnessed in April. The annual projection saw a rise of 3.8%, slightly tempering from the previous month’s recalibrated growth of 4.3%. The softer-than-anticipated spending, coupled with a fall in the inflation index, pushed the US Dollar on the back foot, thereby escalating EURUSD from 1.0840 to 1.0920. Despite the bullish slant of speculators on EURUSD, the swift ascent in EURUSD and EURINR prices might face a hiccup. The predicted spot price band lies between 89.00 to 90.00.
JPYINR
Japan’s Tankan survey indicated an upswing in business sentiment in Q2, credited to the zenith in raw material prices and a relaxation in pandemic-related restrictions, thereby invigorating consumption. Nevertheless, despite the renewed optimism, USDJPY persevered in its upward trajectory propelled by the rise in US bond yields and the presence of a risk-on mood in Asian finance circles. As a result, the bearish trend in JPYINR is set to continue, influenced by the muscle of USDJPY and the frailty of USDINR.
Disclaimer
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