Daily Market Report: Thursday- October 18, 2012

The Indian Rupee opened stronger at 52.95 levels after closing yesterday at 52.87 levels. The Intraday range for the rupee is seen between 52.85-53.15 levels.

The Asian shares rose to their highest in seven months on Thursday after a surge in U.S. housing starts that has followed other positive economic data, helping to further ease worries about a slowdown in global growth.

China's economic growth slowed for a seventh quarter while showing signs of a pickup last month, reducing the urgency to add stimulus by the central bank. The Chinese GDP expanded to 7.4% in the third quarter from a year earlier, the slowest pace in more than a decade.

The better than expected U.S. data and the hope that Spain will eventually ask for a bailout helped to ease the tension and the anxiety in the financial markets. Moody's decision last night to reaffirm Spain's Baa3 rating drove the EUR/USD to a 1 month high, Spanish 10 year bond yields to a 6 month low. By passing on the opportunity to downgrade Spain's rating to junk, Moody's removed one major uncertainty from the financial markets and investors around the world has responded positively.

The EU Leaders Summit which is starting from today is expected to disappoint markets again. In fact, German government sources said that no decisions are expected at the Summit.

The US treasury yield rise to 1.81% as the risk appetite increases in the global market. The Indian Bond yield ended flat on Wednesday. No big debt price movements are expected ahead of the central bank's policy review towards the end of the month. The benchmark 10-year bond yield closed flat at 8.15 percent after moving in a narrow 8.15 to 8.16 percent band during the session.

Outlook: Rupee has made a temporary short term bottom below 51.50 levels. Exporters can sell above 53.00 levels; importers who couldn't cover at 52 levels can cover close to 52.60 levels. Exporters maintain selling partially only in long term. Rupee is expected to be in the range of 52 - 54 levels for next couple of months. Rupee is holding weak despite dollar holding weak in the recent days in international markets.

(Source: Corporate Communications Team, India Forex Advisors Pvt. Ltd.)

Thursday, October 18, 2012