Last Updated on 11/05/2022
NRI Newsletter - Market News

TODAY: Wednesday 11th  May ,2022 

USD/INR: As on 10th  May ,2022 

INR:

 

The rupee gained against the US dollar as a decline in international crude oil prices and the greenback’s global retreat from near 20-year highs boosted the Indian currency.

 

Currency dealers also took heart from likely heavy interventions by the Reserve Bank of India to curb depreciation in the rupee after the Indian unit fell to a record low earlier in the week. The central bank is believed to have heavily intervened in the non-deliverable forwards segment in order to shield the rupee. the partially convertible rupee opened at 77.2720/$1 as against 77.3300/$1 at previous close. The Indian currency, which was last at 77.2260/$1, moved in a band of 77.1440-77.5750/$1 so far in the day.

 

On Monday, the rupee had fallen to an all-time low of 77.5250/$1 as expectations of aggressive interest rate hikes by the Federal Reserve sent US bond yields and the dollar surging, eroding global appetite for riskier emerging market currencies.

 

The US dollar index, which measures the greenback against six rival currencies, was last at 103.80 as against 103.94 at previous close. So far in the current calendar year, the dollar index has gained about 8 per cent.

MAJOR WORLD CURRENCIES:  As on 10TH May ,2022  :

USD:

The dollar rose on Tuesday, after fluctuating between modest gains and declines earlier in the session as it held near a two-decade high ahead of a key reading on inflation that could provide clues on the Federal Reserve's monetary policy path.

 

Equities were also choppy and off their initial highs, although a drop in the yield on the benchmark U.S. 10-year note below the 3% level helped lift growth stocks and put the Nasdaq and S&P 500 on track to snap a three-day losing streak.

Investors will closely eye the April consumer price index reading on Wednesday for any signs inflation may be starting to cool, with expectations calling for a 8.1% annual increase compared to the 8.5% rise recorded in March.

"It’s the calm before inflation data tomorrow, so this is allowing a breather for risky assets," said Joe Manimbo, senior market analyst at Western Union (NYSE:WU) Business Solutions in Washington, D.C.

"Nothing has materially improved when it comes to global growth, worries about China so the market is just seeing there is an occasion before the inflation data tomorrow and there is a little bit of positioning going on and that is working in the favor of risk assets."

The dollar index rose 0.203% at 103.900, with the euro down 0.24% to $1.053.

The greenback has climbed nearly 9% this year to reach 20-year highs as investors have gravitated towards the safe haven on concerns about the Fed's ability to tamp down inflation without causing a recession, along with worries about slowing growth arising from the war in Ukraine and rising COVID-19 cases in China.

After the Fed raised its benchmark overnight interest rate by 50 basis points last week, the largest hike in 22 years, investors have been attempting to assess how aggressive the central bank will be. Expectations are completely priced in for another hike of at least 50 basis points at the central bank's June meeting, according to CME's FedWatch Tool https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html?redirect=/trading/interest-rates/fed-funds.html.

Multiple Fed officials on Tuesday echoed the need for a 50 basis point hike at the next meeting. Cleveland Federal Reserve Bank President Loretta Mester on Tuesday said raising interest rates in half-point increments "makes perfect sense" for the next couple of Fed meetings.

New York Fed President John Williams said that Chair Jerome Powell's indication the central bank will hike by half a percentage point at the next two policy meetings is sensible.

In addition, Federal Reserve Governor Christopher Waller said now is the time to "hit it" on raising rates to deal with too-high inflation and an "out of whack" labor market.

"They've been so hawkish so any slight move off that the market wants to sniff that out," said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management in Boston..

 

EUR:

EUR/USD is extending recovery gains to test 1.0550, as the US dollar takes a breather ahead of the critical US inflation. The upbeat market mood checks the dollar's upward trajectory while Treasury yields stabilize. ECB Lagarde's speech awaited as well.

The mega event of the US Consumer Price Index (CPI) will release today and investors are seeing yearly inflation on the lower side. A preliminary estimate of 8.1% against the prior print of 8.5% is very much lucrative for the Federal Reserve (Fed). However, the deviation between the targeted inflation of 2% and inflation forecasts is extremely wider. This will continue to haunt the US economy as elevated price pressures will continuously reduce the real income of the households. The core CPI that excludes food and energy prices is seen at 6%, lower than the former release of 6.5%.

Meanwhile, the US dollar index (DXY) has tumbled to near 103.83 after a long consolidation in the early Tokyo session. The comments from Cleveland Fed President Loretta Mester have bolstered the fact that the Fed won’t get softer on interest rates sooner. Fed policymaker believes that the central bank won’t stop until it finds a ‘compelling’ slippage in inflation numbers.

On the euro front, the speech from European Central Bank (ECB) President Christine Lagarde will remain in focus. ECB Lagarde may dictate the roadmap for concluding the Asset Purchase Program (APP) in the third quarter of this year. Apart from that, the speech will put some light on the employment numbers and growth rate of the eurozone.

GBP :

GBP/USD is trading better bid above 1.2300, having stalled its rebound near 1.2350. The cable defends gains, as risk sentiment remains in a fairly better spot, weighing down on the safe-haven US dollar. US inflation and Fedspeak remain in the spotlight.

Other than the market’s capitulation, mainly due to the mixed comments from the Fed speakers and upbeat news from China, GBP/USD buyers also cheer a temporary Brexit relief. “Despite being closer to the Foreign Secretary, Nicholas Watt claimed Mr. Johnson wants one last push in which the EU needs to be less ‘theological’,” per the UK Express. “The news comes after EU leaders urged the UK Government to back down over the Northern Ireland Protocol,” adds the news.

Additionally, comments from the UK think-tank, shared by the Financial Times (FT) also favor GBP/USD prices as the news said, “While we expect consumption to grow overall due to households using their pandemic savings, aggregates can hide what’s happening at the disaggregate level.” The analysis also mentioned that the Bank of England will need to raise interest rates to 2.5% and keep them there until the middle of the decade in order to bring soaring inflation under control.

It’s worth noting that the US 10-year Treasury yields and the US Dollar Index (DXY) remain pressured at around 2.99% and 103.90 levels respectively whereas the S&P 500 Futures print mild gains near the 4,000 level after a mixed closing on Wall Street.

Looking forward, GBP/USD traders will keep their eyes on the Brexit headlines for fresh impulse but the US Consumer Price Index (CPI) figures, expected to ease to 8.1% YoY from 8.5% prior, will be crucial to follow.

USD/INR  as on 10th May ,2022 

Currency

OPEN

HIGH

LOW

CLOSE

USD/INR

77.29

77.4450

77.2075

77.33

 

 

Forward premium (%)  as on 10th  May ,2022 

Periods

1 Month

3 Month

6 Month

12 Month

Premium

3.78/3.85

3.86/3.91

3.93/3.95

4.09/4.10

       

 

USD/INR Cash/Tom/Spot Levels: (in Paisa)                                      

(Updated as on 11th  May,2022  @ 09.00am)

 

Cash/Tom:      0.25/1.25                   Cash/Spot: 0.50/2.50  

Tom/Spot :      0.25/1.25                    Spot/Next:  2.00/4.00

 

Cash Date  :  11th  May 2022

Tom Date    :  12th  May 2022 

Spot Date   :   13th  May 2022 

Outlook for the day (10th  May ,2022 )

USD/INR is expected to trade in the range 77.10 to 77.40 downside. All major currencies are expected to upside side against the US dollar.

MAJOR WORLD CURRENCIES:

As on 10th  May ,2022 

CURRENCY

OPEN

HIGH

LOW

CLOSE

GBP

1.2330

1.2375

1.2290

1.2322

EUR

1.0556

1.0585

1.0524

1.0527

AUD

0.7066

0.7078

0.6943

0.6955

JPY

130.25

130.57

129.79

130.43

CHF

0.9937

0.9975

0.9904

0.9960

XAU

1853.46

1865.17

1835.11

1838.14

 

 

GOLD :

Gold Price is meandering near three-month lows, extending its selling spiral so far this week, as the haven demand for the US dollar remains unabated. Despite the latest downtick in the dollar, the bullish momentum remains intact.

The US consumer inflation is seen easing to 8.1% YoY in April vs. 8.5% booked in March. The core CPI is also expected to soften, on an annualized basis, to 6%, although seen edging a tad higher to 0.4% MoM in the reported period. Any signs of inflation peaking in the US economy is likely to temper Fed’s hawkish expectations, which could save the day for gold bulls while extending the dollar’s corrective downside. On the other hand, hotter than expected US inflation readings will push for aggressive Fed rate hikes, supporting the case for a 75 bps June lift-off at gold’s expense.

On Tuesday, the greenback found a fresh impetus from the hawkish comments from the Cleveland Fed President Lorretta Mester, as she said a 75 bps rate hike in June is not off the table. Further, the cautious tone on the Wall Street indices combined with anxiety ahead of the main event risk of this week, the US inflation data, sought investors to seek refuge in the buck. Gold Price tumbled sharply on Tuesday to hit the lowest levels in three months at $1,836, accelerating the decline following a firm break of the $1,850 psychological barrier.

  Foreign Currencies

  Updated: 17:30 hrs (12:00 GMT)   on 10th  May ,2022 

USD/INR: 76.3350 [FXIR]

Against

USD

INR

1 EUR    =

1.0553

81.6116

1 GBP   =

1.2339

95.4237

100 JPY =

130.08

59.4519

1 AUD   =

0.6956

53.7942

1 CHF    =

0.9934

53.7942

 

Precious Metals

Updated: 17:30 hrs (12:00 GMT)  as on 10th  May ,2022 

Gold ($/oz)

1860.63

Silver ($/oz)

21.88

 

Stock Indices

( As on 10th May ,2022  )

 

Index Close

9th May

10th May

BSE Sensex

54470.67

54364.85

NSE Nifty

16301.85

16240.05

Dow Jones

32245.70

32160.74

NASDAQ

11623.25

11737.67

 

 

 

 

 

 

 

 

 

 

 

 

 

              Major Economic Data Releases for the Day

Date

Region

Time(IST)

Description

11/05/2022

EUR

01.30 PM

ECB President Lagrade Speaks

11/05/2022

USD

06.00PM

CPI  M/M

11/05/2022

USD

06.00PM

Core CPI  m/m

 

 

The views contained herein are those of individuals and not necessarily those of the Bank.  This is for information purpose only and no recommendations are intended.  While due care has been taken in preparation of this communication, IOB cannot be held responsible for any consequences of any decisions based on this information. Comments/Suggestions may be freely emailed to feddeal@iobnet.co.in