Saturday, July 28, 2012

The rupee remained volatile

Karvy Stock Broking has come out with its report on "currency outlook for the week". As per the research firm, for the coming week, looking at the domestic and international events, the rupee is expected to remain volatile with a positive bias from the domestic side.

Fundamental ReviewThe rupee remained volatile in the last week with it showing losses and gains during the week. But in the end the rupee closed exactly where it started the week. Towards the end of the week we saw gains in the Euro helped rupee recover its losses but however the gains for the week were restricted as higher domestic demand for dollar kept a check on it. Furthermore the domestic equities also ended lower which further put some pressure on the rupee. The rupee ended the week at 55.32, with a weekly decline of 0.01%.

The one-month offshore non-deliverable forward contracts were at 55.65, in the currency futures market, the most-traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all ended around 55.5775.

Last week saw the local unit end completely flat as mixed cues throughout the week kept it volatile. The coming week could be another volatile one as rupee looks for direction among domestic and global events. Domestically we have two major events for the next week. On Tuesday we have the RBI’s quarterly review where we could expect the central bank to hold its rates given the inflation remaining high. But if the central bank goes ahead with a 25bps cut in its rates then we could see the rupee rally in the next week as its parallels the gains in equities. After the RBI meet we have the Import and Export figures on Wednesday. We could the cost of imports coming in lower due to steep fall in crude oil prices. This could be slightly positive for the rupee. So domestically we could see the rupee remaining positive for the next week.

From the international front the investors would be closely watching on to the Central banks and their moves next week. Both the US FED and ECB are stated to decide on their policy rates next week. We saw another week of slower economic growth from US and Euro which puts further pressure on both the economies to act on the deepening crisis. Though both the Central banks are expected to keep their rates unchanged this time the press meet after the meet and what steps they would take to stimulate the economy would have a far reaching effect on the markets. So for the coming week we could expect the currency markets to remain volatile. So, for the coming week, looking at the domestic and international events, we can expect the rupee to remain volatile with a positive bias from the domestic side.

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