Currency Insight

China gives currency largest boost in a decade

China on Monday raised the daily reference rate for its yuan currency by the largest margin in a decade, officials and reports said, just three months after a surprise devaluation sent shockwaves through global markets.

The central People’s Bank of China adjusted the central rate of the yuan — also known as the renminbi (RMB) — upwards by 0.54 percent against the US dollar, according to a statement.

China now allows the currency to trade up or down two percent from the centrally set daily rate on the domestic foreign exchange market.

EUR/USD off lows but below 1.10

The euro lost ground on Wednesday as data showing euro zone inflation dipped back into negative territory in September fuelled expectations the European Central Bank will expand or extend its asset purchase programme.

The euro fell 0.4 percent to $1.1205, and was down 0.7 percent against the British pound, although it remained on track for a quarterly gain against the dollar.

“A weak number was expected and bolsters expectations that the ECB may have to expand its asset purchase programme from the 60-billion-euros-a-month to something larger, perhaps by year-end,” said Richard Falkenhall, currency strategist at SEB.

“That is negative for the euro, but a lot depends on how stock markets behave. If stocks drop, then the euro is likely to be supported as they are going in opposite ways.”.

Sterling trades above $1.52, but lags euro on soft UK data

Sterling rose 0.4 percent against a struggling dollar on Tuesday, as investors fretted about when the U.S. Federal Reserve will raise interest rates amid growing doubts over a global recovery.

The International Monetary Fund (IMF) cut its global growth forecasts for a second time this year on Tuesday, citing weak commodity prices and a slowdown in China and said policies aimed at increasing demand were needed.

Important events and their explanation:
Time ( IST) Currency Economic Data Actual Expectation Previous
12:30am EUR ECB President Draghi Speaks      
7:15am CNY Caixin Services PMI     50.5
4th-9th GBP Halifax HPI m/m   0.70% -0.90%
2:30pm EUR ECB President Draghi Speaks      
3:00pm GBP Services PMI   54.6 53.3
4:00pm USD FOMC Member Brainard Speaks      
6:45pm USD ADP Non-Farm Employment Change   183K 200K
7:00pm USD Trade Balance   -42.7B -48.3B
8:30pm USD Fed Chair Yellen Testifies      
  USD ISM Non-Manufacturing PMI   56.6 56.9
9:00pm USD Crude Oil Inventories   2.5M 3.4M

 

Explanation:- Market may pay more attention to Fed Yellen testify and ISM Non manufacturing index. We assume above data to come as per the expectation which might be negative for the USD.

Quick Glance :
Instrument Price %Chg Volume OI
USD/INR 65.68 0.17 788526 960103
EUR/INR 72.09 -0.82 37048 48836
GBP/INR 101.23 0.07 21059 41217
JPY/INR 54.39 -0.64 7908 15311

 

Technical touch :

FOREX USDINR_Daily_1Year

Pair is trading near crucial resistance area. Any closing above 65.70 may further push the pair till 65.90 levels. Below this may fall till 65.40 levels.

 

 

Currency Insight

Dollar edges up near 2-1/2-month high ahead of Fed outcome

The dollar edged closer to a 2-1/2-month high against a basket of currencies on Wednesday as traders awaited clues from the Federal Reserve about the timing of a U.S. interest rate increase.

A rate hike at the Fed’s two-day policy meeting which ends later on Wednesday is virtually priced out due to underlying concerns over a slowdown in China and the broader impact on global growth.

But many investors still expect the Fed to indicate that interest rates could rise as early as December. The index, which gauges the greenback against six rival currencies, stood at 96.958 , up about 0.1 percent from late U.S. trade and not far from a 2 1/2-month peak of 97.201 scaled on Friday.

Sterling hits 8-month low vs euro as consumer prices fall

The euro lost ground on Wednesday as data showing euro zone inflation dipped back into negative territory in September fuelled expectations the European Central Bank will expand or extend its asset purchase programme.

The euro fell 0.4 percent to $1.1205, and was down 0.7 percent against the British pound, although it remained on track for a quarterly gain against the dollar.

“A weak number was expected and bolsters expectations that the ECB may have to expand its asset purchase programme from the 60-billion-euros-a-month to something larger, perhaps by year-end,” said Richard Falkenhall, currency strategist at SEB.

“That is negative for the euro, but a lot depends on how stock markets behave. If stocks drop, then the euro is likely to be supported as they are going in opposite ways.”.

Sterling trades above $1.52, but lags euro on soft UK data

Sterling rose 0.4 percent against a struggling dollar on Tuesday, as investors fretted about when the U.S. Federal Reserve will raise interest rates amid growing doubts over a global recovery.

The International Monetary Fund (IMF) cut its global growth forecasts for a second time this year on Tuesday, citing weak commodity prices and a slowdown in China and said policies aimed at increasing demand were needed.

Important events and their explanation:
Time ( IST) Currency Economic Data Actual Expectation Previous
All Day EUR German Prelim CPI m/m -0.10% -0.20%
1:30pm EUR Spanish Flash CPI y/y -0.60% -0.90%
2:25pm EUR German Unemployment Change -4K 2K
3:00pm GBP Net Lending to Individuals m/m 4.4B 4.3B
6:00pm USD Advance GDP q/q 1.60% 3.90%
USD Unemployment Claims 264K 259K
USD Advance GDP Price Index q/q 1.50% 2.10%
6:40pm USD FOMC Member Lockhart Speaks FOMC Member Lockhart Speaks
7:30pm USD Pending Home Sales m/m 1.10% -1.40%

 

Explanation:- Out of the above mentioned data , Market may react more on US unemployment numbers and Pending home sales. We assume both the data will come as per the expectations, hence this would be neutral for the USD. All eyes are on the upcoming FOMC statement.

Quick Glance :
Instrument Price %Chg Volume OI
USD/INR 64.92 0.17 788526 960103
EUR/INR 71.82 -0.82 37048 48836
GBP/INR 99.25 0.07 21059 41217
JPY/INR 53.93 -0.64 7908 15311

 

Technical touch :

 

Dollar Index

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Today we will discuss INR movement based on Dollar index. As seen Dollar index is forming a perfect bullish pattern on its weekly chart, and touched its above falling resistance line. We assume dollar index might fall in the coming days near its base. This would be positive for the INR for few trading sessions. Range :- 64.88-65.20