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NRIOL.COM - Forex News and Analysis |
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September 10, 2002
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Local news and views:
Rupee’s close at 48.475 on Monday – the strongest level this financial year – was no clue of its fate towards the weekend. Rupee resumed the trend of setting records with the start of the week as banks kept dumping dollars on expectation of strong inflows and weakening of Greenback across the board. Range bound gold and crude oil prices and good July export data too encouraged the banks and traders to go short on dollar. Rupee tested an intra week high of 48.4425 on Wednesday. And then one fine morning (Friday morning to be precise), George Bush pulled the carpet. Market got caught off-guard and largely short on dollar. INR slipped beyond the psychologically significant 48.50 mark amid reversal of short dollar positions by the banks and panic buying by importers pushing it to late 48.50s by Friday evening. With forward premia below 4%, buying short-term forward dollar was not a difficult decision for import hedgers.
Benchmark 6-month premia broke below 4% early last week amid constant receiving interest posed by the market and in expectations of the softening of bank rate by RBI. But with the jets blazing in gulf, market turned keen on paying during last two days and premia closed above 4% again.
Where do we go hereon ?
I say, atleast not to 49.00 mark, as of now. If the US and Iraq decide to make it a ‘now or never’ issue, there, no doubt there will be some pressure on international crude prices, which might give some short term jitters to Rupee. But then let’s don’t forget that the mid – term outlook still remains intact. Ample forex reserves, improving exports, comfortable current account balance, capital inflows and above all weak dollar and subsequent under valuation of Rupee should keep Indian unit stable in mid term.
International news:
USD:
Dollar was on a roller coaster ride last week against most of its counterparts amidst mixed economic data and volatile equity markets. Equities staged a miserable performance early last week. Also potentially weighing on the greenback this month is the continuation of earnings guidance and warnings from US corporations as well as the return of scrutiny on US corporations' financial results as the deadline was set last week on companies not having certified their results last month. However positive data from US came to the aid of the dollar and the currency recouped most of its losses towards close. US manufacturing index was recorded flat at 50.5 in August as against 50.8 forecast. However, the new order index dipped to 49.7 from its previous 50.4. US Non-manufacturing dipped too to 50.9 from its previous 53.1 and way off forecast of 53.5. However the numbers, which came as the shot in the arm of the US currency, were the factory orders and unemployment numbers. US Factory orders jumped to 4.7% in July after a negative 2.5% growth in its previous month and unemployment percentage dipped to 5.7 in August vis-à-vis its previous as well as its forecast 5.9%. Dow closed at 8427 losing close to 200 points in the week while NASDAQ closed at 1251.
EUR- (O-0.9823; H-0.9989; L-0.9800; C-9816) :
Euro rose against the dollar however failed in its attempt to cross parity. The single currency faced major resistance close to the parity level with traders squaring off just off the major psychological mark. The outlook for the single currency remained muddled amid resurfacing concerns surrounding the stability pact. The data from Euro Zone were mixed and did not offer any directional help to the currency. Euro Zone PMI fell to 50.8 but the fact that it is holding up above that of US reduced the intensity of its impact. Euro Zone retail orders dipped 0.5% in June vis-à-vis its previous growth of 0.3%. E-12 Services PMI fell to 50.8 too from its previous 52.3. French Q2 GDP grew at 0.5% as against forecast 0.6%. Euro Zone unemployment rate remained unchanged at 8.3%. German manufacturing orders and retail orders both fell 0.9% in July, way below the respective forecasts. First release on E12 Q1 GDP showed a growth of 0.3%.
GBP- (O- 1.5509; H-1.5726; L-1.5469; C-1.5578) :
Sterling rose against the USD last week outperforming the euro thanks to upbeat UK economic data. However, sterling reversed course like with other currencies and closed the week at 1.5578 way short of its intra-week high of 1.5726. The economic data released from UK were positive and provided a platform for an initial rally of the currency. UK PMI for the manufacturing and service sectors rose to 51 and 55.1 respectively in August from their previous readings of 48.8 and 54.7. UK industrial production also staged a smart recovery too in July growing a 3.4% as against a decline of 4.3% in June.
JPY- (O-118.5; H-118.89; L-116.88; C-118.55):
The dollar slid against the yen too and fell to levels below 117 despite the worrying fall in the Nikkei. Japan’s corporate capital expenditure declined in Q2 but did not have any impact on the currency pair as the markets conveniently ignored any fundamental factor from this region. However, dollar resurgence across the board saw the currency pair closing at 118.55. USD could decline against the Japanese currency this month as the customary repatriation of earnings by Japanese companies at the end of the first half of the fiscal year would give a boost to the local currency. Also the slump in Japanese stock market could push the dollar down if the fund managers sell their foreign assets in an effort to strengthen their balance sheet. Nikkei fell last week to a 19-year low of 8969 but recovered to close the week at 9129.
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Source: Mecklai Financial Services
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