Daily Market Report: Tuesday - November 20, 2012

The Indian Rupee opened at 54.81 levels after closing yesterday at 55.06 levels. The Intraday range for the rupee is seen between 54.70 - 55.10 levels.

The RBI Deputy Governor Subir Gokarn said yesterday that the Reserve Bank will intervene in the Forex market only to curb excessive volatility in the exchange rate but stated there is no target set for rupee.

The Asian equity market rose on the hopes of a compromise in the U.S. fiscal crisis, while the Euro fell after Moody's Investors Service downgraded France, reminding investors of the prolonged Euro zone debt crisis.
The prediction that Greece will get a lifeline to stay solvent also boosted the sentiment, but the Euro zone's debt crisis saw Moody's cut France's government bond rating to Aa1 and kept its negative outlook, citing the country's uncertain fiscal outlook and deteriorating economic prospects.

The Moody's decision to downgrade France serves as a harsh reminder that the next phase of weakness in the Euro could come from significantly slower growth in Germany and France.

The stability in the Euro may lead many investors to consider that Greece were to receive its next bailout payment then maybe the risks in the Euro zone would start to diminish. Today, Euro area finance ministers are meeting in Brussels to discuss the disbursement of 44 billion Euros. Even the approval is given money will be paid only on 5th December, if the nation meets all remaining conditions.

The US 10 yr treasury yields rose from 1.59% to 1.63%, currently at 1.61%. The Greek 10 yr yield dropped 25bps.The Indian 10-year bond yield steady at 8.19%, with investors awaiting any possible announcement of open market operation from the RBI to ease liquidity.

Outlook: Exporters sell close to 55 at least 40-50% for next 2 months and partially for longer term (8-12 months only). The rupee is still expected to be weak with some dips in between . Uncovered Importers are still recommended to cover on dips close to 54.50 Overall USD/INR pair remains in a bullish trend.

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

Tuesday, November 20, 2012