Tuesday, June 26, 2012

Currencies 26.06.2012

Asian markets are trading on a negative note due to ongoing concerns of


the Euro debt crisis and German Chancellor Angela Merkel resist sharing

the Euro area debt causing the crisis to worsen further thereby limiting

growth of the entire global economy.

Moody’s the credit rating agency downgraded 28 Spanish banks due to

piling sovereign debt and souring real-estate loans. The agency

downgraded six banks by four levels and 10 by three grades and the rest

getting one- and two-tier declines.

US New Home Sales increased by 26,000 to 369,000 in May as against a

previous rise of 343,000 a month ago.

China’s Conference Board (CB) Leading Index rose by 1.1 percent in May

when compared to earlier rise of 0.9 percent in April.

US Dollar Index

US Dollar Index (DX) gained by 0.3 percent yesterday on back of rise in the

risk aversion in the global markets ahead of the EU summit to be held on

June 28-29 in Brussels. U.S. equities settled on a negative note in

yesterday’s trading session. The currency touched an intra-day high of

82.83 and closed at 82.66 on Monday.

Dollar/INR

The Indian Rupee swung between gains and losses in yesterday’s trading

session and settled with appreciation of 0.2 percent. The currency

appreciated on the back of series of measure taken by the Reserve Bank

of India (RBI) to curb the fall in Indian Rupee.

The RBI raised the External Commercial Borrowing (ECB’s) by $10 billion

and also raised FIIs investment in corporate bonds to $20 billion and

government bonds by $15 billion respectively.

However, further appreciation in the Indian Rupee was capped taking

cues from weak domestic equities. The currency touched an intra-day

high of 56.37 and closed at 56.98 on Monday.

For the current month, FII outflows totaled at Rs 350.60 crores till 25th

June 2012. While on a year to date basis, net capital inflows stood at Rs

42,143.80 crores till 25th June 2012.

Outlook

We expect Rupee to depreciate today on the back of rise in risk aversion

in the global markets which will lead to increase in demand for DX and

exert downside pressure on the Indian Rupee.

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