By Dilip Parmar
The Indian rupee clocked its best week since March 3, 23 amid lower commodity prices, foreign fund inflows and better economic data. The broad-based weakness in the greenback following the rate pause from Fed also supported the local rupee. Indian stocks have seen inflows of about $1.1 billion in the month so far, taking the quarterly purchases to about $8 billion, as per the official data. Benchmark WTI crude oil prices drifted lower for the second week in a row amid demand concerns. Spot USDINR plunged 0.64% or 53 paise to 81.93 and closed below the 200-day simple moving average.
Outlook
Technical set-up for spot USDINR remains bearish following the formation of lower tops and bottoms. From the level front, the pair has strong support around 81.50 and resistance around 82.30.
The dollar marked its worst weekly decline since January as Fed opted to skip the rate hike and kept the stance hawkish. The yen dropped versus all Group-of-10 peers as the Bank of Japan kept its stimulus program unchanged and signalled it won’t hesitate to ease further if needed.
CFTC Position
As per the CFTC data, the net non-commercial traders cut aggregate dollar short positions for a fourth week running through June 16th. Speculative Accounts cut overall exposure to short dollar positions versus the major currencies by $1.9bn this week, taking their overall dollar short position back to $6.4bn. Leveraged Accounts boosted aggregate dollar longs to $7bn this week (from a net short of USD1.9bn last week) while Real Money Accounts stayed bearish on the dollar and boosted net dollar short positioning $5bn in the week to $34.6bn
What to Watch
The past week was a big one for developed-market central banks, this week will be significant for emerging markets. We have meetings in Brazil, Mexico, Turkey and the UK. The Bank of England is at a tricky juncture as the spread between two-year gilts and two-year bunds reached an eight-month high this week, helping propel the GBPEUR cross to the highest since August, while cable reached the highest since April of last year. The US has a holiday truncated week with the focus will shift to data and Fed speakers, with Chair Jerome Powell testifying before House and Senate committees.
(Dilip Parmar, Research Analyst, HDFC Securities. Views expressed are author’s own.)