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INDIA FX: USD/INR opens at over 7-week high after PBoC devalues currency

 

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       SPOT               1-YR FWD        1-YR FWD          1-MONTH FUTURES

                           PREMIUM        ABSOLUTE

                                            (Rs)

Last    64.1825-64.1925   ----------      ---------        64.3325-64.3350

Open    64.1600-64.1700   ----------      ---------        64.3000-64.3025

High    64.2000-64.2100   ----------      ---------        64.3550-64.3575

Low     64.1100-64.1200   ----------      ---------        64.2525-64.2550

                                            (Rs)

Prev    63.8700-63.8800   7.04-7.09%      4.34-4.36        64.1050-64.1075

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9:15AM//USD/INR opens at over 7-week high after PBoC devalues currency

  Dollar/rupee opened at over seven-week high Tuesday after the People's Bank of China devalues its currency, Yuan, by almost 2% against the US dollar to levels last seen three years ago in a bid to boost the economy, dealers said.

  "PBoC devalued its currency, which should have an impact on our currency as well," said a dealer with a private-sector bank.

  At 9:15AM, the dollar/rupee traded at Rs 64.19/$1 compared to previous close of Rs 63.87/$1 and Rs 64.16/$1 at open.

  A weaker yuan could threaten other economies in the region that compete with Chinese exports, and the move sent other currencies in Asia lower. A weaker yuan could encourage other central banks in the region to also devalue their currencies to stay competitive.

  Chinese exports slumped 8.3% in July, the biggest drop in four months and far worse than expectations for a 1% fall. Exports to the European Union fell 12.3% in July while those to the United States dropped 1.3%.

  The People's Bank of China says the move was a one-off to align onshore and offshore rates in another step toward deregulation of the foreign exchange market. The PBOC also says that the yuan's strength relative to other currencies provided room for adjusting its value.

  Meanwhile, the currency pair was also supported on comments from the Federal Reserve Bank of Atlanta President Dennis Lockhart as he said that the decision to hike rates should come soon.

  "I think the point of 'liftoff' is close," Lockhart said in prepared remarks for an address to the Atlanta Press Club. "The economy has made great gains and is approaching an acceptable normal, conditions are no longer extraordinary."

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8:55AM//USD/INR seen up as PBoC devalues Yuan to boost economy; Outflows eyed

  Dollar/rupee may open up Tuesday after the People's Bank of China devalues its currency Yuan as it allowed the yuan to depreciate almost 2% against the US dollar to levels last seen three years ago, dealers said.

  "Capital flight can be seen from our markets after the Yuan was devalued," said a dealer with a public sector bank.

  Dollar/rupee may open around Rs 64.05-64.10/$1 Tuesday compared with previous close of Rs 63.87/$1, he added.

  A weaker yuan could threaten other economies in the region that compete with Chinese exports, and the move sent other currencies in Asia lower. A weaker yuan could encourage other central banks in the region to devalue their currencies to stay competitive.

  Chinese exports slumped 8.3% in July, the biggest drop in four months and far worse than expectations for a 1% fall. Exports to the European Union fell 12.3% in July while those to the United States dropped 1.3%.

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8:40AM//USD/INR NDF extends gain; Dlr index extends fall to 4th-day

  Dollar/rupee in the inter-bank offshore market extended gains for the second straight day Tuesday, while the dollar index extended its fall for the fourth straight day on comments from Fed officials stating that low inflation is still a concern for the world's largest economy.

  The dollar index, which tracks the strength of the greenback against six major currencies, traded at 97.43 Tuesday during early Asian trades compared with 97.62 at close in New York time.

  Dollar/rupee in the non-deliverable forwards market maturing in one month, traded at Rs 64.06/$1 compared to previous close of Rs 64.04/$1 and onshore spot previous close of Rs 63.87/$1.

  Federal Reserve Vice Chairman Stanley Fischer said Monday that low inflation in the US, while probably restrained by temporary factors, remains a concern as the labor market nears a sweet spot.

  Fischer's remarks indicate that while he is pleased with progress on employment, he may be waiting for signs inflation will start moving up toward the central bank's target.

   The Federal Open Market Committee meets Sep 16-17 for a meeting at which many investors and economists expect it will raise interest rates for the first time in almost 10 years.

  "Employment has been rising pretty fast relative to previous performance, and yet inflation is very low," he said in an interview to Bloomberg Television. "And the concern about this situation is not to move before we see inflation, as well as employment, returning to more normal levels."

  However, the dollar failed to react to positive comments from the Federal Reserve Bank of Atlanta President Dennis Lockhart as he said that the decision to hike rates should come soon.

  "I think the point of 'liftoff' is close," Lockhart said in prepared remarks for an address to the Atlanta Press Club. "The economy has made great gains and is approaching an acceptable normal, conditions are no longer extraordinary."

  

Crude oil may extend gain Tue on weak rupee, short-covering

  Crude oil prices are likely to extend gain for second straight trading day in opening session Tuesday on weakening of local currency against the dollar trimming the prospects of higher imports and as investors may cover short positions at lower levels, analysts said.

  "Rupee depreciation and low level buying will push the prices of crude," said Ajay Kumar Kedia, research analyst with Kedia Commodities.

  At 9:30AM rupee depreciated to Rs 64.19/$1 as compared to previous close of Rs 63.87/$1.

  Crude oil prices may also be supported on short-covering after prices fell to over four-month low, analysts said.

  Domestic crude oil prices fell by nearly 4% to Rs 2,824 per barrel in past three straight trading sessions (Aug 5-7), its lowest level since Mar 19 on weak demand from bulk consumers and oversupply woes in global markets.

  Meanwhile, China devalued its yuan currency following a run of poor economic data that underscored the market view that fundamentals are too weak to warrant higher oil prices.

  China devalued the yuan on Tuesday in what its central bank called a "one-off depreciation" of nearly 2% as its economy grows at its slowest pace in decades, guiding the currency to its lowest point in almost three years.

  Investors will keep a close watch on American Petroleum Institute (API) coming later today and Energy Information Association (EIA) inventories data which will be released on Wednesday.

  West Texas Intermediate, the US benchmark, for September delivery jumped 3.17% to $44.96 a barrel on the New York Mercantile Exchange Monday.

  Brent, European benchmark for September contract surged 4.19% to $51.02 per barrel, on the London-based ICE Futures Europe Exchange Monday.

  Crude oil for August delivery rose 1.27% to Rs 2,860 per barrel, at the closing of trades Monday, on Multi-Commodity Exchange (MCX).

  Crude oil prices for August delivery are likely to find support at Rs 2,745 per barrel and resistance at Rs 2,943 per barrel today on Multi-Commodity Exchange (MCX).

 

Base Metal Outlook: Copper seen flat Tue on demand hope, strong dollar

 

    Copper may open flat Tuesday on hope of demand hope from China and as strong dollar dents investors' purchasing power for buying dollar-denominated commodities, said analysts.

  "Base metals will be up on China demand hope while strong dollar will cap the prices at higher level," said Netra Deshpande an analyst with Emkay Global Financial Services.

  Prices of the industrial metals will be supported as investors hoping more stimulus measures from China's central bank following slew of weak economic data, said analysts.

  China's central bank cut the currency's reference rate by a record 1.9%, allowing depreciation to combat a slump in exports.

  China imports fell 8.1% in July compared to analysts' estimate of 8.1% fall and 6.1% de-growth for the same period a year earlier, data by the National Bureau Statistics of China showed.

  Exports in China also declined to 8.3% for the same period compared to 2.8% growth a year ago.

  China Jan-Jul copper, copper product imports fell 9.5% to 2.59 million tons on year, government data showed.

  China is the world's largest consumer of copper accounting for about 40% of total global demand and major consumer of other industrial metals.

  However, sharp fall in the red metal prices will be capped by strong dollar against other currencies, said analysts.

  At 9:50AM dollar index, which measures the strength of greenback against its six major trading partners, jumped 0.24% to 97.43.

  Red metal prices will also be under pressure on higher stockpiles of the metal on LME, indicating oversupply situation, said analysts.

  Copper stockpiles rose by 1,800 tons to 354,125 tons, LME data showed on Friday, its highest level since January 2014.    

   On Monday, copper for August delivery at the close of trades jumped 2.80% to Rs 338.95 per kilogram on the MCX.

  MCX copper prices are likely to find support at Rs 324.1 per kilograms while resistance is seen at Rs 348.1 per kilograms today.

  London Metal Exchange (LME) copper prices may open at $ 5,263.50 per MT and find support at $4,964 MT and resistance at $5,581 per MT.

  MCX aluminium for July delivery at close of trades climbed 1.49% to Rs 101.85 per kilograms on the MCX.

   Meanwhile, Goldman Sachs Group Inc, global investment bank, trimmed aluminium prices estimates by 21% from 2016 through 2018 on oversupply woes, Bloomberg reported.

  The bank cuts its aluminium prices forecast to $1,525 ton in 2016, to $1,625 in 2017 and to $1,700 in 2018 from $1,925, $2,100 and $2,200 respectively previously estimated as it expects supply surplus of about 2.5 million tons to 3 million tons from 2016 to 2019.

  MCX aluminium prices are likely to find support at Rs 98.9 per kilograms while resistance is seen at Rs 104.1 per kilograms today.