August USDINR settled at RBI Fix at 55.66. Sept USDINR closed at 55.94, up 3 paise on session. USDINR closed at 55.63 from 55.67 and traded the range of 55.57-55.74. USDINR opened near Tuesday's close and traded choppy through the session around it. The session saw month end and oil and gold importers demand interspersed with dollar sales from banks covering for the inflows with respect to a few companies debt inflows. EURUSD's direction too influenced the pair with comments from ECB Chief Draghi urging Germany to support euro rescue plan, supportive of the former. Tracking EURUSD's marginal gains, USDINR drifted lower briefly also below 55.60 level.
Separately, the RBI Governor Subbarao warned that India needed to prepare for a ratings downgrade incase the pace of investment inflows did not improve.
Overseas, US dollar drifted tad lower against the euro during European session, following the release of the ECB chief Draghi's article in a German publication.
'Go beyond standard monetary policy tools':
Draghi pointed out that while the central bank had always acted within its mandate it at times for fulfilling its mandate was required to go beyond standard monetary policy tools. Draghi's comments urged Germany to remain as an anchor of strong euro.
'Channeling the monetary policy signal strongly':
Draghi wrote that when markets are fragmented or influenced by irrational fears, our monetary policy signals do not reach citizens evenly across the euro area. Hinting perhaps that at times like these exception measures would be required. Overall Draghi's article seemed to target the criticism from German quarters about the proposed bond purchase program by ECB. Draghi had pointed out that a working group was preparing a plan which will be discussed at Sept 6 meet to outline short tenure bond purchase to support distressed member states. As per reports, Draghi's plan would also include additional time for distressed countries in the vicious grip of de-growth and forced to implement austerity measures at the same time for bailout funds. Draghi though made it clear that for any such bond purchase action from the ECB, an official request would be required to be made to the bailout funds and post that memorandum of understanding with respect to fiscal reforms needed to be signed.
Separately after the Italian PM Monti and German Chancellor Merkel's meet, the latter commended Italy's efforts at implementing reforms Both leaders met up to discuss the measures to lower borrowing costs for distressed member states but differed over the role of ESM in this as well as over granting banking license to it.
Into US session though, US dollar retraced some of its losses against other majors as economic data tempered expectations for US Fed policy action. US Q2 Preliminary GDP grew in line with expectations 1.7% on year and tad higher than earlier reported advance GDP figure of 1.50% and data internals showed improved consumer spending (1.7% v 1.5% expected). Pending home sales in Aug rose sharply by 2.40% m/m vs 1.0% expected and to highest level since April 2010.
Importantly, Federal Reserve's Beige Book report of anecdotal information on current economic conditions in 12 Fed districts pointed to gradual growth in July and early August across most regions and sectors. It pointed out that manufacturing activity was softening in many areas of the country and in most districts surveyed the employment was holding steady or expected to grow only slightly. Overall the beige book appeared to be less dovish than US FOMC Aug meeting minutes.
EURUSD: Closed at 1.2526 from 1.2562 and traded in 1.2518-1.2572 range .
GBPUSD: Closed at 1.5828 from 1.5813 and traded the range of 1.5802-1.5854.
USDJPY: Closed at 78.60 from 78.48 and traded in 78.47-78.77 range.
Spot USDINR has opened at 55.72 from 55.63 and was trading flat. USDINR could trade in 55.50-55.80 range. USDINR is likely to trade choppy and in a narrow range and trade volumes seen muted. Domestic market participants await the direction US dollar would take after the Aug 31 Jackson hole symposium and focus on US Federal Reserve chairperson Bernanke's comments for hints on any additional monetary easing. Meanwhile in the lead up to this symposium after a dovish Fed meet minutes releases last week, comments from various Fed officials have added to uncertainty over possibility of QE3. Meanwhile US economic data releases on Wednesday as discussed in re-cap section, point to a gradual growth albeit not 'substantial'. So it remains to be seen if Bernanke's comments suggest that whether the economy does indeed need a 'shove' instead of 'gentle push' to bring about a jump in growth.
Separately, ECB chief Draghi's comments in an article (discussed in market recap section) suggest that the central bank might be planning for non-standard measures which might be detailed on Sept 6 following ECB's governing council meeting. Singling out Germany (whose officials have criticized the ECB bond purchase program) he added that "Strong" decisions had to be made to manage euro area and that the country needed to be an anchor of strong euro.
Back on domestic front, the RBI Governor Subbarao's comments that India needed to be prepared incase there was a credit ratings downgrade haven't evoked any sharp reaction in currency market here.
Technical Trades Outlook:
USDINR: Support at 55.00, 54.70 Resistances at 56.20, 56.50
Price is trading in the range of 55.00-56.20 levels. Only a decisive break above or below this range would decide further direction.
EURINR: Support at 69.30, 68.90 Resistances at 70.50, 71.00
On upside, 70.50 would act as strong resistance. Price need to break above 70.50 levels to rally further. GBPINR: Support at 87.10, 86.50 Resistances at 88.45, 89.00
Price is likely to trade sideways to higher towards 88.45-89.00 levels.
JPYINR: Support at 70.50, 70.20 Resistances at 71.20, 71.50
Price tested the support of 70.50 levels and is likely to trade sideways to higher towards 71.20 levels.
EURUSD: Support at 1.2480, 1.240 Resistances at 1.260, 1.2650
Price is likely to trade in the range of 1.250-1.260 levels.
USDJPY: Support at 78.25, 78.00 Resistances at 79.00, 79.40
Price is likely to trade with the positive bias towards 79.00-79.40 levels until it sustains above the support of 78.25 levels.
GBPUSD: Support at 1.5750, 1.5720 Resistances at 1.5870, 1.5920, 1.5960
Price rebounded from the support levels and traded higher, price is likely to resume its upward journey towards 1.5920 levels. 1.5720 would act as strong support.