Jan 30 2019

Rupee Opened Lower On Higher Crude, Offshore Dollar Demand

USD/INR – The Indian rupee opened lower against the dollar amid a rise in Brent crude oil following sanctions on Venezuela. Dollar demand from offshore participants ahead of India’s interim budget is also expected to weigh on the local currency. The rupee opened at 71.36 versus its previous close of 71.11. Offshore investors were probably in a bit of de-risking mode before Friday’s budget in light of the rupee’s recent performance. The Indian rupee and equities are among the worst performing assets in the regional space this month. This is primarily a reflection of the uncertainty of what the interim budget will bring. Other Asian currencies were mostly higher on Wednesday ahead of the U.S. Federal Reserve’s policy outcome. The Fed is unanimously expected to keep its policy unchanged and investor attention will be primarily on whether the central bank changes its guidance in light of the recent dovish rhetoric.

EUR/USD – The euro zone single currency was little changed at $1.1435. The euro was locked in narrow trading range, with traders reluctant to take big positions due to uncertainty over the U.K. parliamentary vote and as traders grow cautious ahead of the Fed meeting and U.S.-China trade talks. A key source of fuel for gains in EUR/USD, was the unwinding of short EUR/USD positions used to fund recent bets on emerging market plays. But second thoughts about what to expect from the Fed are a distraction. Dollar bears were leaning on reports the Fed might alter its balance sheet reduction sooner than expected, but some are cautioning against expecting too much change from the FOMC this go round. The upcoming Sino-U.S. trade talks also temper EUR/USD bulls as traders are reluctant to push aggressively on concerns no progress on trade issues will be made. EUR/USD could trade heavily if the talks falter as increased trade tensions could hinder already slowing euro zone economic growth.

GBP/USD – Sterling fell 0.71% to $1.3062 in late trading on Tuesday as British lawmakers rejected most amendments seeking for Britain to avoid leaving the European Union without a deal, reviving worries of a chaotic withdrawal from the trading bloc that would damage the U.K. economy. British lawmakers failed to pass several proposals that take a “no-deal” Brexit off the table. Instead they voted to instruct Prime Minister Theresa May to demand from the EU to replace the Irish border arrangement as a part of Brexit, but Brussels said it will not change. GBP/USD was last trading at $1.3095.

USD/JPY – The greenback was flat at 109.40 yen after posting modest gains the previous day. U.S. stocks will light the path for USD/JPY in this week laden with event risk. The two have become increasingly positively correlated, having recovered roughly half of their collapses tied to the U.S.-China trade war and fears of Fed over-tightening. Expectations for U.S.-China trade talks Wednesday and Thursday are modest. Most expect the tariff truce to eventually be extended beyond the March 1 deadline. That would be neutral-to-positive for U.S. stocks and USD/JPY. If a truce extension looks unlikely, USD/JPY will weaken.

Currency Range for today

Currency Pair Upper Lower
USD/INR 71.15 71.65
EUR/INR 81.00 81.80
GBP/INR 92.95 93.75
JPY/INR 0.6490 0.6550

Important data releases today

Date Time Currency Event Forecast Previous
30-Jan-19 6:45 PM USD ADP Nonfarm Employment Change (Jan) 170K 271K
30-Jan-19 7:00 PM USD GDP (QoQ) (Q4) 2.6% 3.4%
30-Jan-19 8:30 PM USD Pending Home Sales (MoM) (Dec) 1.1% -0.7%
30-Jan-19 9:00 PM USD Crude Oil Inventories 7.970M