CURRENCY & COMMODITIES VIEW

 Forex News

India's forex reserves dip to three year low

India'sreserves have dipped to $275.5 billion, a 39 - month low, as Reserve Bank of India

continued to sell dollars to support the battered local currency.

The rupee has come under come under severe pressure and been the worst performing Asian currency since global investors offloaded their investment in emerging economies to

maximize return from rising US bond prices after the Federal Reserve withdrew quantitative easing.

The rupee depreciated about 27% since April to its record closing low of 68.80 a dollar on August 28. In comparison, Indonesian rupiah fell about 12% this year while Malaysian Ringgit saw 8% depreciation. Japanese yen fell 11.6% this year.

 

The rupee has however recovered since August 28 level on strong RBI action and improved sentiment after governor Raghuram Rajan took measures aiming to boost dollar inflows. The rupee closed Friday at 65.25 a dollar, nearly 110 paise higher than Thursday's close.

The sentiment in the market has definitely improved

.RBI under Rajan has subsidised swap cost to attract FCNRB deposits and enhanced limits for exporters to rebook cancelled forward exchange contracts to attract

inflows. Rajan's decision to roll back the amount a company can use to invest overseas to 400% of its net-worth, from 100%, has also made investors' easy.

The Forex reserves dipped $2.2 billion in the week ending August 30

to $275.5 billion. In rupee terms, it gained Rs 450 billion to Rs 18.341 billion due to exchange rate movement. Foreign currency assets feel $3.080 billion to $247.402 billion, Reserve Bank of India said in its weekly report. Foreign currency assets expressed in dollar terms include the effect

of appreciation or depreciation of non US currencies such as euro, pound and yen held in the reserves

 

COMMODITIES.......

MARKET OUTLOOK

The appointment of the new RBI Governor and his market friendly approach has reinstated belief that there is at least some light at the end of the tunnel. The measures announced by the visionary and his body language on the very first day of assuming office led to a strong move in equities and currency markets. Momentum oscillators on the daily and the weekly charts are positively poised. The “bullish hammer” candlestick pattern is also confirmed and signals possibility of a further up move. Considering these technical evidences and the charts of other individual index heavyweights, we are of the view that the market can move higher towards 5900 over the next 3 to 5 days. We remain positive and advise traders to buy into any decline. Only a move below the 5500 mark would mean that the wave count and market outlook needs to be revised. We suggest that traders buy into banking and oil and gas counters to make superlative gains over the next few sessions. The risks to the above analysis are the Syrian conflict and the US FED tapering. In case the US decides launch military action against Syria, oil prices will surge and the Rupee depreciate again. Also, the US FED tapering which is likely to begin in this month may have some effect on the markets. However, the charts don’t lie and the probability of these mishaps occurring, seems to be bleak at this juncture.