Lakshmi Vilas Bank

Market review (Previous trading day):

INR:The Indian rupee dropped to its lowest to 55.42 in nearly six months on Tuesday, dragged by late falls in local shares and import-related demand from a private company. The rupee has fallen 2.9 percent so far this month against dollar, despite strong foreign inflows into debt and stock markets as the dollar gains against global currencies on worries about whether the U.S. monetary stimulus will continue. Lingering domestic concerns such as wide current account deficit have added to the rupee’s weakness. There was intermittent selling from custodian banks, but dollar demand was so high that once 55.20 levels got broken, there was short squeeze. The rupee is expected to weaken further in the coming days, driven by global dollar strength and the stock market rally nearing its peak.

G-7: The dollar rose against major currencies again on Tuesday, as currency markets keens awaiting the Federal Reserve’s chairman Ben Bernanke’s testimony before U.S. Congress on Wednesday for a cue to the dollars outlook. The dollar firmed, gold fell and shares slipped off five year highs on Tuesday as investors positioned for an update on the futures of Federal Reserve’s stimulus programme. A slowdown in British inflation sent sterling to a 7 week low on the view that it could give the bank of England more leeway to support UK economy and yen lost ground after Japanese minister rowed back on remarks suggesting the currency has weakened enough. The dollar index was up 0.4 percent against a basket of major currencies at midday in Europe, comfortably below its recent three year high.

Market Outlook:

INR: The Indian Rupee opened at 55.38 versus its previous close of 55.41 on the back of weaker dollar overseas and positive equity markets. Rupee weakened to 55.48 after opening, its weakest in last 6 months. The follow on dollar buying is there in the market and bias may remain for the pair’s weakness on the month end dollar demand with crucial 55.20 levels broken yesterday. The rupee may trade in the range of 55.30 to 55.60 levels today.

G-7: The dollar edges down as fed officials hint at status quo. Currency markets cheered the news with Euro and Yen inching up against dollar. Crude prices fell, led lower by a sharp drop in U.S gasoline futures as traders bet the market would be well supplied this summer, and as an industry report showed rising fuel stockpiles in the world’s largest oil consumers. U.S. Treasuries ended stronger on Tuesday after buyers stepped back in, attracted by higher yields, and after 2 voting members of the U.S. Federal Reserve struck a dovish tone on the economy, reducing expectations that the U.S. central bank is close to tapering its bond purchases.

Key data releases for the day:

Currency

Time (IST)

Data Release

Forecast

Previous

GBP

1400

RETAIL SALES

2.00

-0.5

USD

1630

U S HOME SALES CHANGE

1.5

-0.6

Disclaimer::: Markets can be volatile. Any employee / bank is not responsible for any liability arising out of transactions done based on the above mentioned views. Customer is soley responsible for the transactions concluded by him.

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