The Indian rupee managed to score gains against Euro, Pound and Yen as well.
Over the week, economic news from Euro zone has been better than consensus but US economic data has been softer. UK economy continues to robust growth but recent economic data has been mixed. Japanese economy continues to muddle along, in spite of billion US Dollars central bank's asset and debt monetisation.
US economy added only 113,000 jobs in January, better than 74,000 that it added over last December, but weaker than forecast and last 12 month trend. Unemployment rate dipped to 6.6% from 6.7%. We expect unemployment rate to dip further in the coming months, as more people are expected to leave the labour force as well as the level unemployment claims continue to remain low. As a result, US Fed is very much on track to reduce another USD 10 billion of asset purchases over the next FOMC meeting next month.
India's economic growth is likely to accelerate 5.6 percent in 2014-15 from a range of 4.7 to 4.9 percent in 2013-14, the National Council of Applied Economic Research said in a report. However, macro data points are not expect to major trigger for rupee as it is known fact the Indian economic growth remains weak and headwinds plenty. The only hope that remains is the formation of strong pro-reform government in the upcoming national elections. In case the elections throws up a fractured verdict, which remains a major risk, we can expect risk premium to rise on rupee.
Over the next week, keep an eye on the major economic releases around the globe and also the trend in financial markets. In case risk aversion makes a return, rupee can find it difficult to gain past 61.50/70 against the US Dollar. Therefore, we expect a possible range of 61.50/80 and 62.60/90 on the US Dollar. We expect, dips below 62.00 to be utilised by importers and oil marketing companies to hedge their forwards US Dollar commitments. As well, demand can resurface from corporates who have large commitment of FCY loan repayment over the next few months.
- Anindya Banerjee