Rupee opens lower tracking weakness in Asian currencies

Abhishek Goenka IFA Global

US initial jobless claims rose by 1.3mn, in line with expectations, while continuing claims declined to 18m from 18.8mn. However, the pace at which jobless claims are falling has slowed and this soured sentiment. The Dow shed 1.4%. Tech stocks however continue to outperform. The Nasdaq hit a new high for the fourth straight day.

Onshore the rally in bonds continues. Abundant liquidity is beginning to work its effect on the longer end of the curve as well. Anticipation of OMOs and Twists by the central bank is also compressing term premia. Top notch corporate bonds are trading at the same yields as SDLs. Spreads of top rung corporate bonds have compressed to lowest levels in several years.

USDINR continues to get bid up as inflows are being absorbed. Today's weekly closing will be important. Rupee is likely to trade 74.85-75.25 range. May IIP is due today. Asian currencies are trading weak against the USD. Asian equities are trading weak. Shanghai Composite is on course to snap a 8 session winning streak. Nifty is expected to trade with a slight negative bias.

Strategy: Exporters are advised to cover between 75.00 - 75.40 through forwards. At lower levels only cover through option strategy. Break below 74.50 may possibly take rupee to 73.80. Importers are advised to hold maintaining a stop loss of 75.50 or cover through risk reversal option strategy.

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Author

Abhishek Goenka

IFA Global

Mr. Abhishek Goenka is the Founder and CEO of IFA Global. He pilots the IFA Global strategic direction with a focus on relentlessly improving the existing offerings while constantly searching for the next generation of business excellence.

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