It is an important week from US data point of view. We have the June ADP private payroll data, ISM manufacturing and FOMC minutes on Wednesday. We have the NFP data for June on Thursday, Friday being a US holiday.
We saw the nationalized banks aggressively buying USD, likely on behalf of the RBI and defending the 75.40 level yet again. Month end exporter selling could likely cap up side in USDINR. Jio related inflows are also expected to hit the market over the coming week.
RBI FX Reserves fell USD 2bn to USD 505.5bn as on week ending 19th June. This was the first decline after 7 successive weeks of rise. The central bank most likely sold Dollars into the spike post Indo-China border tensions in order to smoothen volatility. Rupee is likely to trade in 75.40-75.80 range. Asian currencies are trading flat.
The fall in US equities on Friday was led by banks, after the Federal Reserve asked them to cap dividends and halt buybacks to build up defence in case the crisis worsens further. US recorded 40000 new confirmed Coronavirus cases, the highest recorded so far.
Strategy: Exporters have been advised to cover on every uptick. Break of 75.40 level will be crucial as it may initiate fresh downside move. Importers have been advised to cover partially at spot levels. The 3M range for USDINR is 74.50 - 77.50 and the 6M range is 74.00 – 80.00.
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