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RBI announcements of $5bn Swaps and Geopolitical tensions to Weigh on Rupee -  HDFC Securities 

Indian rupee expected to open slightly lower after RBI’s announcement of sell buy swap which could widen the gap between spot and forwards/futures. Overnight gain in dollar index and crude oil prices following geopolitical tension between Russia and Ukraine bode well for safe haven currencies.

Reserve Bank of India announced a sell/buy swap auction worth $5b with a view to extend the maturity profile of its forward book and smoothen the receivables relating to forward assets. The RBI had a long forward book of $49.1 billion as of end-December, according to its latest bulletin. The step also comes ahead of the mega Life Insurance Corp. of India share sale, which is expected to see major inflows

Global markets brace for more volatility ahead as we are having to contend with two almost mutually-exclusive, interchanging walls or worries in Ukraine and the Fed. As tensions over Ukraine worsen, the size of the Fed’s expected March hikes comes off.

The dollar pared losses against other Group-of-10 currencies after the Kremlin said there are “no concrete plans” for a summit between U.S. President Joe Biden and his counterpart Vladimir Putin.

Asian stocks look set to continue sliding Tuesday on intensifying tension between the West and Russia. Elsewhere, Oil surged as traders weighed the risk of disruptions to supplies of energy and other commodities if the situation escalates. Gold was near $1,906 an ounce.

Technical Observations:

USDINR February futures formed reversal pattern hammer on daily chart.

The pair has formed lower low while yet to make lower high for trend reversal

Short term trend remains weak following breaking of rising trend line support

Relative Strength Index of 14 days period floating below 50 with southward direction indicating weaker momentum.

ADX line placed below 25 and -DI going north while +DI on south indicating weaker trend.

Long unwinding continue with fall in price, volume and open interest.

USDINR February futures expected to consolidate in narrow range of 74.40 to 74.90.

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