Home > Business & Investment > Third Consecutive Week Of Gains For Rupee

Third Consecutive Week Of Gains For Rupee

Monday, September 23, 2013
By Pramit Brahmbhatt

Pramit Brahmbhatt is CEO of Alpari FinancialServices (India)

Last week the Rupee movement was stable, in the first half of the week, it strengthened after the meeting of Federal Open Market Committee which concluded that the U.S. economy isn’t yet healthy enough for the central bank to ease its stimulus even slightly. On last day of the previous week the rupee traded weak as the RBI had announced its credit policy. The RBI raised repo rate by 25 bps to 7.50%; lowers marginal standing facility rate by 75 bps to 9.50%, relaxes banks’ minimum daily cash reserve requirement to 95% of deposits from 99% from September 21. The trading range for the spot USDINR pair is expected to be within 61.30 to 63.50.

It is recommended to be cautious and Sell USD/INR Futures on rise with the appropriate stop loss as the Rupee is expected to appreciate against dollar. The Pivot Point for the Pair is at 62.65.

The Rupee managed to trade Strong against the Dollar for the 3rd consecutive week from its record high of 69.22. The Fed Chairman last Wednesday announced to hold its assets buying program which supported the rupee rally and tested a month high of 61.59. Later, last Friday the RBI Governor Raghuram Rajan in his maiden policy review, however, unexpectedly hiked the Key Short Term lending rate (Repo rate) and reduced marginal standing facility rate which capped the rupee gain.

The euro traded higher against the U.S. dollar throughout this week, trading near seven-month high on news that the Federal Reserve held back from reducing the USD85 billion pace of its monthly asset purchases. Fed Chairman Ben Bernanke refused to commit on reducing bond purchases this year, saying the stimulus program was “not on a preset course.” In economic news, the US posted strong data last Thursday, highlighted by a solid Unemployment Claims release.

Commodities jumped as the Fed surprisingly left the policy rate and the QE measures unchanged in September. Policymakers acknowledged that the economic recovery in the US was taking place but the improvement in the labor market remained uncertain. They were concerned that tightening at the current stage would be premature and damped the recovery. Crude oil prices soared with the front-month WTI contract remaining firm in European session after jumping +2.51% last Wednesday. Brent crude contract retreated modestly following a rise of +2.23% on the previous day. Gold moved sideways around a 1-week high.

Last Tuesday the government hiked Import duty on gold jewellery from 10% to 15%, setting it higher than raw gold duty in a move aimed more at protecting the domestic jewellery industry than stemming bullion imports. India imported gold jewellery worth $137.57 million in the four months from April to July this year - a fraction of overall bullion imports, which were at $2.9 billion in July alone.

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