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Emkay Global Financial Services Ltd

Published on 18/03/2021 5:26:52 PM

Below are Perspective on Emerging market foreign currencies (EMFX) by Madhavi Arora, Lead Economist, Emkay Global Financial Services

INR's recent upmove looks transient

INR has had a decent year so far in the EMFX space, with March being specifically an outlier one. INR spot returns in March so far have been 1.4%, while all of the EM Asia basket is showing negative spot returns.

A large part of that INR outlier behaviour is attributed to:

(1)    IPO impact: With the huge line up of IPOs and possible robust FPI interest amid oversubscription and constant $ selling pressure in INR offshore mkt,  which led to upside pressure on INR Appreciation in last few days, a part of which could reverse as actual IPO allocations happen.

(2)    PSU’s overseas bond/loans flows hitting continuously: REC and NABARD raising close to $1.2bn in March.

(3)    RBI’s mild hands off on movement from 73.50-72.50 in less than two week’s period. Sources however say RBI did intervene today as INR tried to flirt below 72.50.

(4)    March Seasonality where exporters convert their bunched up dollar earnings to INR before fiscal year end closing which tends to artificially push INR up against USD.

*  On Net, INR relative up-move looks a bit transient in nature. We would wait up for the IPO effect to get reversed (which partly could be countered by March seasonality in last week of March) and in all likelihood INR will start following suit of its EMFX peers by first week of April.

*  We anyway think policymakers are getting more tolerant on a weaker INR in the medium term and CY21 will see INR being in the middle of the EMFX pack and not an outlier on either side on spot returns.

 

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SEBI Registration number is INZ000203933
 

Emkay Global Financial Services Ltd

Published on 17/03/2021 4:54:25 PM

Below are Views On The trading in USDINR spot is very lackluster ahead of the Fed`s outcome By Mr. Rahul Gupta, Head Of Research- Currency, Emkay Global Financial Services

“The trading in USDINR spot is very lackluster ahead of the Fed’s outcome. The forex market will react to this FOMC policy only through the prism of US Treasuries. If Powell presents a dovish narrative then we may see a modest gain in the emerging market currencies later this week. However, any  signal or inclination to start raising interest rates in 2023, and no expression over inflation will fuel the dollar rally. In USDINR spot 72.40-72.50 is acting as a strong support zone, a break of which can push prices towards 72.20-72.25, while 73 will act as a crucial resistance.”

 

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SEBI Registration number is INZ000203933

Emkay Global Financial Services Ltd

Published on 12/03/2021 5:16:36 PM

Below are Views On With Biden passing the $1.9 trillion fiscal stimulus package By Mr. Rahul Gupta, Head Of Research- Currency, Emkay Global Financial Services

"With Biden passing the $1.9 trillion fiscal stimulus package, the question arises whether the US economy is still in need of an additional monetary policy support. Or like ECB policy, the Fed can also increase the volume of bond buying in order to calm the rising US yields. So next week’s Fed policy outcome is very crucial to set the overall mood of the market. Right now, higher risk appetite is keeping the spot below 73 zone. For next week, we expect USDINR spot to trade within 72.25-73.25 with a sideways bias.”

 

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SEBI Registration number is INZ000203933

Emkay Global Financial Services Ltd

Published on 15/02/2021 5:05:31 PM

Below are Views On Equities are charged on ‘risk-on’ tone as countries By Mr. Rahul Gupta, Head Of Research-Currency, Emkay Global Financial Services

“Across the globe, equities are charged on ‘risk-on’ tone as countries and regions are rolling out vaccines and easing lockdown restrictions. This optimism has pushed Indian rupee to surge to 72.57, highest level since Mar 3, 2020. The trading range has shifted to 72.00-73 and RBI seems to be comfortable with rupee appreciating below 73 level. This week is a holiday thinned market so fx trading may be uninspiring but RBI intervention will be eyed. The focus will remain on global flash PMIs and Fed minutes and until then 72.50 will act as a strong support in USDINR spot, a break of which can push the spot price towards 72 zone, while 73 will act as an immediate resistance.”

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SEBI Registration number is INZ000203933

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