DAILY MARKET REPORT: Tuesday - January 22, 2013

The Indian Rupee opened at 53.60 levels after closing yesterday at 53.76 levels. The Intraday range for the rupee is expected between 53.30 to 53.70 levels.

The rupee has been appreciating since last 2 ½ weeks on account of a series of steps taken by the government within the last few days. The deferment of GAAR till 2016, the partial deregulation of the diesel prices and the dollar-rupee swap facility provided by the RBI have been the main contributors for the strength in the rupee.

Rupee was seen slightly weak against the US dollar yesterday taking cues from the weak Euro and the recovery in the dollar index. However the losses were restricted later by the government’s decision to hike the import duty on gold.  The import duty on gold and platinum has been raised to 6 percent from 4 percent.  Gold imports constitute a key demand for dollars in the domestic currency market after oil pressuring the fiscal deficit.

The ratings agency, Moody’s seems to have a different view about Indian economy unlike the other two global rating agencies -Standard & Poor's and Fitch.  Moody's, has recently affirmed its "stable" outlook on India's ratings, citing the country's potential economic growth, robust domestic savings rate and a dynamic private sector.

Globally, we have been noticing that the central banks across have been working hard to devalue their currencies with the help of quantitative easing or by intervention in the currency market. The countries like US, UK, Europe and Japan have been doing the same thing.  In this context, the ongoing two policy meeting of the Bank of Japan will be very significant as it has been one of the most aggressive central banks this year.

The FII’s have poured in funds worth $2.45 billion in the Indian equity markets so far this month. Whereas the debt markets have witnesses an outflow of worth $101.60 million.

The US 10 year treasury yields are trading higher at 1.86%.

Outlook: Exporters wait for initiating covers since the rupee has slid over 3 percent in the recent days. Importers should cover on dips as and when comfortable and keep stop loss of 54.10 on worst case in case unable to cover below 54.00. OVERALL: USD/INR pair still maintains bullish but since rupee is slightly strong in short term on local news hence one should buy the pair on dips.

EURUSD: The Euro is trading lower at 1.3308 levels against the US dollar. The euro was seen trading on a flat note on account of closure of the US markets. The Euro-area finance ministers approved the payout of 9.2 billion euros ($12.3 billion) to Greece this month. The German ZEW economic sentiment and the ECB President’s speech today will be closely watched by the markets. Support is at 1.3240 and resistance is at 1.3495.

GBP/USD: The pound is trading at 1.5835 levels. Nothing much from the data front overnight but heavy snow in UK affecting most of the country threaten to hurt the retail sales and construction after a contradiction forecast by economists for the last three months. The Public Sector net borrowing data is due for the day which is forecasted at pound 13.4bn. Near term support is seen at 1.5820 and resistance is at 1.6180 levels.

USDJPY: The Yen is trading at 89.54 levels. Yen is seen trading stronger since yesterday against the US dollar as investors are waiting for the results of the Bank of Japan meeting today. The central bank is expected to increase its asset purchases by 10 trillion yen ($111 billion). The near term support is seen at 86.85 and resistance is at 91.10.

AUD/USD: The Australian Dollar is trading at 1.0523 levels. There was no data released overnight but economists predict the wholesale sales to improve which helped the Australian dollar to stick to the levels of 1.0500. The near term support is seen at 1.0396 and resistance is at 1.0597 levels.

Gold: The Gold is trading at $1691 levels. Internationally, gold prices are getting support on account of monetary stimulus measures taken by the central banks across the world. The investors are cautious that excessive printing might lead to debasement of the currency. In Indian context, gold prices rose after the finance ministry's decision to raise the import tax on gold to 6 percent from 4 percent. The near term support is seen at $1680 levels whereas resistance is seen at $1695 levels.

Crude oil: The crude is currently trading at 95.45 levels. Oil is seen gaining and it is at near four month high before Bank of Japan decision and after the Euro-area finance ministers approved the payout of 9.2 billion euros ($12.3 billion) to Greece this month. Support is near 92.80 and resistance is at 97.60 levels.

Dollar Index: The US dollar index has recovered modestly and trading at 80.02 levels. Although there was very little movement on account of closure of the US markets, the US dollar index continued to trade above 80.00 levels amid BOJ Policy meeting.  The economic reports over the last few weeks have been pointing towards the recovery in economic growth. However, worries of US debt ceiling which still remain unresolved are hurting the market sentiments. Tomorrow’s voting on debt ceiling will be a crucial event to watch for. Support is near 78.99 and resistance is at 80.67 levels.

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