Published on 16/03/2017 12:18:11 PM | Source: Sharekhan
Dollar plunges after Fed signaled gradual rate hike - Sharekhan
US DOLLAR INDEX (DX)
US Dollar depreciated by 0.94 percent in yesterday’s trading session against basket of six major currencies as the Federal Reserve after raising rates by 0.25 percent signaled more gradual pace of monetary tightening this year. Traders were disappointed as central bank sticks to its previous outlook of 2 more rates this year and three more hikes in 2018. However, sharp downside was cushioned on the back of upbeat economic data from US.
The Indian Rupee appreciated by 0.16 percent in yesterday’s trading session on continued FII inflows into local shares. Further, market sentiments improved after BJP victory in Uttar Pradesh. Additionally, upbeat economic data supported Rupee. Benchmark stock index 50 shares Nifty Index decreased marginally by 0.02 percent to 9084.8. FII’s net bought stocks worth Rs 1141.13 crores yesterday as per provisional data from NSE. However, sharp gain was prevented as investors remained cautious ahead of US Federal Reserve monetary policy. In Intraday Indian Rupee touched a high of 65.41 and closed at 65.69 against Dollar.
Indian Rupee is expected to trade with positive bias on the back of rise in risk appetite in the domestic markets after BJP victory in Uttar Pradesh. This state sends highest number of lawmakers in lower house. Ruling party BJP’s win in this crucial state boosted chances of existing Prime Minister Narendra Modi to win election again in 2019 and return to the power for second term. Further, victory will help Prime Minister to pass reforms quickly. Further, upbeat economic data will support Rupee. Trade deficit narrowed to $8.9B in February compared to $9.84B in January. However, sharp gain may be prevented on the back of rise in demand for dollar. Dollar may gain strength as US Federal Reserve increase rate by 0.25 percent and indicated more rate hike in the coming months. Upbeat economic data from US will be dollar supportive. USDINR March expected to trade in a range between 65.35 on lower side to 66.0 on higher side with downward trend.
Euro appreciated by 1.23 percent in yesterday’s trading session on the back of weak dollar and as European Central bank kept its monetary policy unchanged. Further, exit pools of Dutch election showed that anti-Islam and anti-EU Geert wilders won just 19 seats in 150 seats and Prime Minister Mark Rutte’s VVD party won maximum seats. In intraday Euro touched a high of 1.0742 and closed at 1.0735 against Dollar.
Euro currency expected to trade with negative bias on the back of divergence in monetary policy. US Federal Reserve raise interest rates by 0.25 percent to a range of 0.75 percent to 1.0 percent whereas, European Central
Bank continued with its loose monetary policy. US Federal Reserve signaled more rate hikes in the coming months whereas ECB restated that central bank may extend period of bond purchasing program if required. Traders will remain cautious ahead of economic data from Euro Area and US. Demand for Dollar may go up on upbeat economic data from US. Investors are concerns over political uncertainty in France. However, sharp downside may be cushioned as exit pools in Netherlands showed that Prime Minister Mark Rutte’s VVD party wining with big lead against anti-Islam and anti-EU Geert wilders. EURINR March expected to trade in a range between 69.35 on lower side to 70.20 on higher side with sideways down trend.
Pound appreciated by 1.13 percent in yesterday’s trading session on the back of weakness in dollar and upbeat job data from UK. However, sharp gain was capped on uncertainty over when Britain will trigger article 50 added downside pressures. Further, traders remained cautious ahead of Bank of England Monetary policy. In intraday Pound touched a high of 1.2154 and closed at 1.2292 against Dollar.
Pound is expected to trade with negative bias on the back of divergence in monetary policy. US Federal Reserve raise interest rates by 0.25 percent to a range of 0.75 percent to 1.0 percent whereas; Bank of England is expected to continue with its loose monetary policy. Traders will remain cautious ahead of statements from central bank and voting on rate and asset purchase facility to get the hint on policymaker’s outlook on economy. Further, worries over uncertainty when Britain will start formal mechanism for Britain to leave EU will add downside pressure. Scotland’s First Minister Nicola Sturgeon demanded a fresh Scottish independence referendum between autumn 2018 and spring 2019. GBPINR March expected to trade in a range between 79.40 on lower side and 80.60 on higher side with sideways down trend.
Japanese Yen appreciated by 1.20 percent in yesterday’s trading session on the back of weakness in dollar and as the demand for safe haven improved ahead of monetary policy across major central banks and rise in risk aversion in the domestic markets. In intraday Yen touched a high of 113.15 and closed at 113.35 against Dollar.
Yen is expected to trade with positive bias as the demand for safe haven may improve on rise in risk aversion in the domestic markets and ahead of Bank of Japan monetary policy. Further, demand for safe haven may increase on political uncertainty in Europe, concern over Greece bailout, worries over British exit from EU and new Scottish independence referendum vote. However, sharp gain may be prevented on divergence in monetary policy. US Federal Reserve raise interest rates by 0.25 percent to a range of 0.75 percent to 1.0 percent whereas Bank of Japan is likely to continue with it’s lose monetary policy. JPYINR March expected to trade in a range between 57.10 on lower side and 57.85 on higher side with upward trend.
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