By Gaurang Somaiya
Rupee continued to consolidate in a narrow range even after geopolitical tension continue to haunt most market participants and as dollar gained strength following safe-haven demand.
Dollar Index secured weekly gains, as the US economy exhibits robust growth with persistent inflation, which made the Fed stick to a more hawkish tone, further supporting the greenback in a risk-averse market due to ongoing Middle East tensions.
On the domestic front, RBI meeting minutes were released and showed that the policymakers would continue to be disinflationary to ensure anchoring of inflation target and fuller transmission.
On a few future indicators, the RBI said in its statement that unpredictable supply side shocks from adverse climate events, its impact on agricultural production and also as geo-political tension and its spill-over to commodity markets could add to uncertainties to the overall outlook.
This week, on the domestic front, no major economic data is expected to be released but the ongoing election in India is likely to influence the overall sentiment of the market. Dollar that has been slowly and steadily gaining strength could keep the rupee weighed down.
From the US, preliminary manufacturing and services PMI data will be important to watch. Apart from preliminary data, advance GDP will be a key data to gauge a view for the dollar. We expect the USDINR(Spot) to trade sideways with a positive bias and quote in the range of 83.20 and 83.80.
Global Currencies
Dollar in the last few sessions is stuck in the range of 105 and 106.20 and buying is seen at lower levels following better-than-expected economic numbers from the US and safe haven buying as geopolitical tensions in the Middle East remains elevated.
Last week, data released from the US showed retail sales growth in March remained robust. Post the release of the economic data, hawkish statement from the Fed chairman lifted the dollar. The Fed Chair hinted towards delayed interest rate cut after a series of high inflation data.
This week, from the US, preliminary manufacturing and services data and advance GDP will be key to gauge a view; better-than-expected data could extend gains for the greenback. But safe haven buying following escalating geopolitical tensions will keep the dollar supported. We expect the Dollar Index to trade with a positive bias and quote in the range of 105.20 and 106.80.
In case of other major crosses, Euro and Pound were weighed down but the latter was weaker as compared to the former. Latest data released from the UK, showed retail sales witnessed no growth in March as compared to estimates of 0.3% growth.
Inflation in the UK too rose marginally to 3.2%, suggesting that rate cuts announcement from the BoE could be delayed. This week, from the Euro zone and the UK, preliminary manufacturing and services will be the only important data to watch for. Japanese Yen remained under pressure and fell to the lowest level since June’90 despite alert signals from the BoJ over active intervention in the currency.
This week, Bank of Japan will release its policy statement and expectation is that the central bank could keep policy rates unchanged, but commentary could trigger marginal volatility for the safe haven currency.