Indian Rupee to appreciate as world goes on QE binge :: Edelweiss

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USDINR Outlook

• USDINR Spot witnessed a strong sell off after hitting a 8 month high of 63.90 in spot and fell almost 4% towards the level of 61.20 in spot.
• USDINR spot has taken the support of rising primary trend line and witnessed a strong pull back towards 62.50 level. It has retested the lower trend line of the channel which is likely to get breached.
• The high of 62.50-62.80 range is a good strong resistance zone depicted by the trend channel.
• If USDINR spot breaks this level we can expect a good down move towards the level of 61 to 60.50.

Indian factors

• Budget is likely to introduce a globally compatible tax system and introduce clarity on transfer pricing which will help improve confidence of foreign investors as well as local corporate.
• Government has already been taking measures to increase ease of doing business in India by making amendments to the land acquisition, labour laws and working towards single window clearances. These coupled with reversal of the monetary policy, will help kick start the capex cycle and lead to higher growth in India.
• Reformist measures in the government like a clear road map for GST, thrust on infrastructure and measures to provide impetus to “Make in India” will increase improve prospects of India’s growth and lead to flow of funds into India.

Global Factors

• The feds recent monetary statement maintained a dovish tone. There was no removal of the world “ Patient” and there were concerns about the disinflationary forces playing out across the globe. Hence it is possible that the interest rate hike will be later rather than sooner.
• The ECB has also introduced a large scale bond buying program which will pump in 1.1 trillion in the Euro zone. The program will start in March 2015, which will add to the excess global liquidity and lead to flow of funds into Emerging markets, especially India.

LINK
https://www.edelweiss.in/research/Indian-Rupee-to-appreciate-as-world-goes-on-QE-binge/10005626.html