Feb USDINR closed at 49.34, down 30 paise. Spot USDINR ended at 49.19 from 49.41and trade the range of 49.12-49.53. USDINR after a rather flat opening was under tad pressure with equity market sentiment turning weaker. But as the European session got underway, the markets there responded favorably to Greek parliament vote on austerity measures and led to a rally in high yielding currencies against the US dollar.
Overseas, early session saw major gain marginally against the US dollar in the backdrop of Greek vote. Market participants responded favorably particular as European session got underway, as the passing of austerity measures was seen moving Greece that much closer to avoiding default and securing additional funds. Meanwhile a Greek Govt draft legislation report published in news media showed that bailout fund EFSF might provide 35 billion euros to help Greece buyback bonds held as collateral in central banks in Europe, also it might provide 30 billion euros to help finance in part private sector bond swap. Besides this the bailout fund could also provide another 23 billion euros for recapitalization of certain financial institutions.
Improved Italian bond auctions further supported risk on sentiment, with the cost of borrowing for short dated debt dropping to 2.23% from 2.73% and the country raised 12 billion euros in auction. France raised 8.70 billion euros later. Into US session, the rally in major currencies faltered against the US dollar as the negative comments from EU officials and
German Chancellor as well as a downgrade for Spanish banks by S&P weighed. German Chancellor Merkel said that there would be no changes to Greek deal program, ruling out any further help extension from EU-IMF.
Later ECB's Nowotny said that more steps were required before EZ could pay out next Greek tranche and that was followed by Olli Rehn, EU commissioner, who said that more steps were required before the aid could be dispatched.
Spot USDINR has opened at 49.34 from 49.19 and was trading at 49.31. USDINR could trade in 49.10-49.58 range with bullish bias. USDINR is likely to stay supported as the risk aversion is on rise in overseas markets and has added to US dollar's gains against high risk-high yield currencies. There are increasing concerns that the Greek bailout faces more obstacles following reports that Germany (largest contributor to bailout fund) would not approve of the bailout until early March, after the Greek-PSI deal details were clearly agreed and then discussed and put up for vote in German parliament for approval. Greece faces a redemption of 14.50 billion euros on March 20.
Besides this, comments from EU and ECB officials like Rehn and Nowotny that more steps would be required besides the Greek parliament vote to get approval for bailout have been also unsettling.
Moody's latest action has also added to risk aversion, with France, UK and Austria getting warnings about a likely cut to their AAA ratings with their outlook changed to negative and a downgrade for Italy, Spain, Malta, Slovakia, Slovenia and Portugal. S&P has already cut AAA ratings for France and Austria On Japan front, BoJ has left the key rate unchanged but expanded its asset purchase program by 10 trillion yen.
On domestic front, Jan inflation would be the number under focus, with market expectations for a drop to 6.55% from 7.47%. Separately RBI on Monday, increased the bank rate by 350 bps to 9.50%, first change since April 2003, to align it with marginal standing facility rate. The bank rate at which RBI buys or re-discounts bills of exchange or other commercial papers eligible for purchase would henceforth move according to changes in key repo rate at which the liquidity is infused in banking system. The central bank said that this change was not a signal of change in monetary stance but a one time technical adjustment.
Technical Trades Outlook:
USDINR: Support at 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 to hold support at 49.1 and rise to 49.5
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 77.15, 76.7 Resistance at 78.25, 78.9, 79.65. Trend is in consolidation with downside holding at 77.15 and trade range to 78.9
JPYINR: Support at 64.3, 63.2, 62.45 Resistance at 64.85, 65.25. Further declines to stall at 63.2 and trade range to 65.25
EURUSD: Support at 1.309, 1.30 Resistance at 1.3223, 1.3285, 1.332. Downside should remain protected at 1.309 for uptrend to resume, failing which to re-test 1.30