Friday, March 20, 2009

>Rupee Report (MF GLOBAL)

Market Recap:
Spot rupee appreciated marginally against the US dollar, following a firm close in domestic key equity indices. This helped support the view that foreign funds selling in domestic markets may have slowed down thus reducing the demand for dollars. Demand for dollars from oil companies was also not present with RBI announcing Thursday, that it would start special market operations whereby it would buy bonds from oil companies in exchange for dollars. According to newswire reports major banks were among the dollar sellers with atleast 240 million being sold during the session. On overseas economic data front, it was the US non-farm payroll figure for February that the global markets were awaiting. There were expectations that US firms would cut jobs in services sector by 650,000 in Feb. The actual Feb number was in line with expectations at 651,000. The umpemployment rate rose to a 26 year high at 8.10% in Feb from 7.60% in Jan. With US jobs data pretty much inline with expectations, US dollar depreciated against its amjor counterparts on reduced risk perception.

Market Outlook:
Rupee is likely to remain under marginal pressure against the US dollar on weaker cues from domestic equity markets and weaker cues from Asian currencies against US dollar. Major Asian indices have slipped in to negative territory, with Nikkei at 7,115 (- 57.91 points) and Hang Seng at 11,750 (-171 points). SGX Mar Nifty futures contract was at 2568 (-44 points). With weaker
domestic equity markets, there would be renewed concerns over increased FII selling. On currencies front, US dollar was trading weak against major units, but marginally firm against the Asian units, including the locally closely followed Korean Won. Likely range for spot rupee today, is 51.50-51.90 per USD.

Trade Recommendation:
Prices charts indicate that the 51.50 support could hold for spot rupee. We had suggested buying 1-month dollar rupee futures at 51.70 with a stop at 51.50, for targets of 51.90 and 52.20 and will hold maintain this trade.

To see full report: RUPEE REPORT