Rupee gains as RBI surprise, ECB and Greek election are the focus :: Edelweiss, report

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The week that was...

• Rupee closed with a gain of 0.90% for the last week against the US dollar, broader gains in Indian rupee were seen mostly due to strong domestic equity and surprise rate cut by RBI by 25 basis point from 8% to 7.75% .India’s 10 y paper were also touched the 14 month low of 7.65 % as lower WPI and CPI reading in coupled with better than expected IIP number forced India`s central bank to take the decision before the actual RBI policy due next month.
• Surprise decision by SNB to unpeg the Swiss franc against eh euro from 1.20 mark also created a panic across the world currency market . Euro fell to another 11-year low against the dollar Friday, a day after the SNB surprise decision to eliminate its exchange-rate cap removed a source of support for the shared currency. With Euro at 11-year lows early on Monday as investors braced for the European Central Bank.
• Japanese yen gained against all of its major currencies as stocks in China headed for their biggest drop since 2009, spurring demand for haven assets. Britain`s pound posted its biggest weekly advance in almost two years against the euro as speculation that the ECB will likely to came up with strong bond buying program in its monetary policy due later these week on 22nd Jan to control the deflation and bring in the growth by starting government-bond purchases stoked demand for the U.K. currency as a haven.

Currency Outlook for This Week

• Indian Rupee for the week will trade with in a narrow range as market were waiting for the two key economic events i.e ECB monetary policy due on 22nd Jan and Greek election results on 25th Jan. Clear direction can be seen only after the release of these two important update. ECB decision of adding more QE will be positive for the Indian market as these will bring more flows to the Emerging market countries like India, which is currently the one of the best emerging market due to improved macro and lower inflation and higher yields, but a weaker Euro against the US dollar will keep the Indian rupee gains under check.
• USDINR has formed a hammer on daily chart with strong volumes suggest that till the low of 61.50 in the spot doesn`t breached we can see some consolidation in USDINR prices for the week.
• Indian Rupee for the week will trade in range of 61.50 to 62.80 in spot.
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