Expert View: Rupee outlook on Friday

Market Recap:

Feb USDINR closed at 49.41, down 6 paise. Spot USDINR closed at 49.28 from 49.37 and traded the range of 49.18-49.39.

USDINR opened at session high but slipped steadily. Positive momentum in domestic equity indices (which ended 2% higher on session) and later improved economic data from Germany supported risk on sentiment and saw the pair sliding towards 49.20 levels. But the importers oil companies continued to step in with dollar purchases near 49.20 level as they have in past few sessions and this limited further downside.

Thursday, currency market and banks remained closed on account of Mumbai municipality elections.

Overseas, Thursday saw early session filled with increased concerns over a delay in Greek and possibility of a default on the 14.50 billion euros due on March 20, as reports indicated that such an aid could be delayed until April elections in that country. Reports of increased verbal sparring between the Greek officials and the main contributor to the bailout fund Germany, highlighted the growing rift and the increased skepticism on both sides. Greek officials pointed out that the country has fully met the demands on parliament vote, managed to cut additional 325 million euros and received assurances from parties over implementation of budget cuts. But comments from German front seem to suggest that the country is increasingly doubting the ability of Greece to follow completely through on its budget cut promises.

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US dollar remained fairly well bid against the majors well into European session. The reports improved bond auctions in France and Spain did little to influence USD direction. But later it was the reports that a deal on Greece would probably not be delayed and possibly reached as quickly as Monday helped boost risk sentiment leading to a sharp rebound in majors against the US dollar.

Global Economic Calendar and News Highlights: Feb 16

Greek FM Venizelos accused the eurozone of deliberately changing the terms of a proposed Euro130bn (Euro110bn) bailout because key players wanted to kick the country out of the single currency. (The Guardian)

Verbal sparring between Greek and Germany increases, as German Finmin calls providing aid to Greece as putting money into bottomless pit. Greek president Papoulias criticized the comments from German FinMin.

Several EU sources said that euro zone finance officials were examining ways of delaying part or even all of the second bailout program while still avoiding a disorderly default. (Reuters)

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Moody's warns that it may cut credit ratings of 17 global and 114 European financial institutions. (Reuters)

US weekly jobless claims 348000 vs. 361000, f/c 365k, lowest level since March 2008 (BBG)

Continued claims 3.426 million vs. 3.526mln, expected 3.50mln (BBG)

Jan producer price index +0.1% vs. -0.1%, f/c +0.4%; core PPI +0.4% vs. +0.3%, f/c +0.2 (AFP)

Feb Philly Fed Business Conditions Index 10.2 vs. 7.3, expected 9.5 (IFR)

German Finance ministry refused to comment on reports that the delay in providing aid to Greece could last until after the country holds elections expected in April. (WSJ)

Euro govts considering cutting interest rates on loans to Greece and using contribution from ECB to support Greece. (BBG)

ECB might swap Greek bonds for new ones with same value and structure but with different collective action clauses. Move could be completed by Monday. The aim here is that the ECB would not have to participate in registering losses incase Greece imposed involuntary losses on bondholders in future. (BBG)

Expectations that Greek bailout funds deal might be cleared by Monday. (BBG)

ECB-IMF-EC project Greek debt in 2020 would be around 129 percent of GDP higher than the 120% target set by EZ leaders in Oct meet. (Reuters)

India Finance Ministry considering individual foreign investors to directly buy corporate bonds by Indian companies, instead of investing as a sub-account of FII. (ET)

Market Outlook:

Spot USDINR has opened at 49.29 versus 49.28 close Wednesday and was trading at 49.26.

USDINR likely seen in 48.95-49.40 range with bearish bias. Higher yielding currencies including rupee are seen benefitting from US dollar weakness as the risk backdrop improves slightly on hopes that Greece might secure the bailout fund approval as quickly as Monday. In addition reports that ECB might swap new bonds for old Greek debt are also seen supportive for the debt ladened EZ member state desperately trying to avoid the failure to meet its immediate payment of 14.50 billion euros on March 20.

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On domestic front, reports that the FinMin is in discussion with the RBI and regulators to allow foreign investors to directly purchase corporate bonds could be another shot in arm for rupee on hopes of further improvement in dollar inflows. That and the pre-budgetary expectations of relief for corporate sector in the Union budget for 2012-13 are seen supporting equity sentiment and rupee in turn.

Technical Trades Outlook:

USDINR: Support at 49.18, 49.1, 48.83 Resistance at 49.58, 49.81, 50.1. Currently in a consolidation trend ranging 48.83 to 49.75. For the day upside seen limited to 49.45 and move lower to 49.18

EURINR: Support at 64.3, 63.75 Resistance 65.3, 66.1, 66.35. While downside remains protected at 64.3 look for advance to 66.35 / 66.64 but will need a close above 66.64 to confirm a build up of sustained higher move

GBPINR: Support at 77.7, 77.15, 76.7 Resistance at 78.25, 78.9, 79.65. Trend is in consolidation in range of 77.15 and trade range to 78.9. For the day declines to hold at 77.8 and rise to 78.4

JPYINR: Support at 62.45, 61.8, 61 Resistance at 63.2, 63.8, 64.85, 65.25. Downside seen to hold at 62.45, 62 levels and bounce back to 63.8

EURUSD: Support at 1.309, 1.30 Resistance at 1.3223, 1.3285, 1.332. Despite a intraday breach of 1.309, market recovered to close back above 1.309. For the day any declines should hold at those 1.309 and trade higher.