DAILY MARKET REPORT: Wednesday - December 12, 2012

The Indian rupee opened at 54.29 levels after closing yesterday note at 54.26 levels. The Intraday range for the rupee is expected between 54.15 - 54.60 levels.

The Indian rupee rose on Tuesday on the back of inflows from Bharti Infratel's initial public but data showing a high trade deficit weighed on investor sentiment. The government looks to raise $5.5 billion by next March as part of its plans to overpass its current account deficit by selling stakes in companies.

However, the country's current account deficit a continues to remain a source of concern after data showed the November trade gap remained high at $19.3 billion. The IIP figures are due for the day. The investors will be closely looking at the figures.

The Indian government's wide fiscal deficit and a heavy debt burden are the most "significant rating constraints" to the country's sovereign rating, said Standard & Poor rating agency, repeating its warning that India faces a one-in-three chance of being downgraded to junk over the next 2 years.

The Asian markets are trading higher after Japan's machinery orders increased and as investors anticipated the Federal Reserve will step up monetary easing. The firmer economic sentiment in Germany also helped to boost demand for riskier assets, while the dollar is seen hassled ahead of the outcome of the U.S. Federal Reserve's policy meeting later in the day.

The Fed is expected to announce it will buy $45 billion per month of longer-dated Treasuries beginning in January on top of the $40 billion in mortgage-backed security purchases it announced in September. The new buying will replace the Fed's current program, Operation Twist, which expires at the end of December.

The Indian 10-year bond yields were near a six-week low on optimism debt purchases by the central bank will spur demand for the securities. The yield ended at 8.18%.

Outlook: Uncovered Exporters wait till 54.80 to start covering partially . The 54.10 is still seen as a very crucial support, and rupee is seen holding above it. The breakout below 54.10 levels and rupee sustaining below it for few sessions, would it push further to around 53.50 levels. Importer to use a strict stop loss of 54.55 to cover the unhedged exposures. Overall USD INR bullish target 55.00 again.

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