01-01-1970 12:00 AM | Source: ICICI Direct
Rupee future maturing on January 27 appreciated by 0.29% to settle at 81.21 - ICICI Direct
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Rupee Outlook and Strategy

• The US dollar index failed to recover from its seven month low and closed below the 102 mark as a weaker set of economic numbers triggered fears of a recession in the US economy. Further, weakness in US existing home sales, which marked an eleventh straight month of decline, added downward pressure on the dollar. US existing home sales dropped to the lowest level since November 2010

• Rupee future maturing on January 27 appreciated by 0.29% to settle at 81.21 on Friday amid weakness in the dollar

• The rupee is expected to appreciate against the dollar on the back of rising risk appetite in the domestic market and weakness in the dollar. The weaker set of economic numbers and moderating inflation in the US could force the Fed to dial back its aggressive rate hike policy. The CME Fed watch tool suggests the probability of a 25 bps hike has increased above 97%. US$INR has breached the 100 day EMA support at 81.48 and is expected to weaken towards the next support at 80.80, followed by 80.60

 

Euro and Pound Outlook

• The Euro moved above the 1.085 mark to settle near its eight-month high as hawkish comments from ECB President Lagarde at WEF in Davos suggests the continuance of a higher interest rate regime. In her speech she said that inflation is way too high and that they will stay the course on rate hikes, pushing back on recent reports suggesting that ECB officials are considering slowing their rate increments at the next meeting

• The Euro is expected to march towards 1.088-1.09 mark as long as it holds above 1.076, amid weakness in dollar and rising global risk appetite. A move above 1.09 would bring fresh buying interest in the pair and extend its rally towards 1.0920. EURINR (January) is expected to rally towards 88.50 as long as the pair remains above 87.60

• The pound erased its losses and hit the 1.24 mark on Friday despite a weaker set of the retail sales numbers. UK retail sales volume have declined 1% from November, suggesting higher cost of living has forced consumers to stay away form retail stores

• The pound is expected to trade with a positive bias amid expectation that the BOE will increase the interest rate by 50 bps in it upcoming policy following a higher set of inflation numbers. Technically, 1.23 holds key support to the pair. As long as it sustains above 1.23, it is likely to rally towards the 1.2445 mark. A move above 1.2445 would again open the door for 1.2650. GBPINR (January) is expected to rise towards 100.80, followed by 101 as long as it holds above the key support of 100.00

 

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