Weekly forex report 31-01-09

Summary: Rupee traded in a narrow range this week and completed monthly loss on concern the corporate earning will continue to decline and FIIs will pullout from market. The Dollar started trading with gain during the beginning of week but failed to sustain at upper level and finished at loss against the Rupee.
Market Analysis: USD/INR January futures contract expired at 48.87 on 28th February 2009. However dollar ended weak at 48.9300 on Friday (30 January 2009) from last week closing of 49.2425. The dollar February contract at NSE went up as high as 49.40 at the starting of week but pared gain later. Implied volatility on one-month dollar-rupee options was at around 11 percent this week, down from 15% last week. The JP Morgan Asia Dollar Index, which tracks 10 Asian currencies, went higher at 105.5 during the week but finished at 104.69, almost at the same level of last week. Overall Asian currencies remained indecisive for the whole week.
USD/INR Technical Chart

Technical Analysis: The Rupee is trading at its immediate support level of 49 and has shown several bouncing from the level. Any fresh infusion of negative sentiment in the equity market may force Rupee to break support.

Weekly Currency Report

Summary: We expect Indian rupee (INR) to continue weaken against US Dollar due to continuing demand from importers and foreign fund withdrawal from Indian equity market. However, psychological resistance at level of 50 remains strong in the coming week.

Market Analysis: INR has been moving sidewise between 50 and 47 level since the last three months. Implied volatility on one-month dollar-rupee options was at around 15 percent this week, the lowest since September 2009. The gauge of fluctuations touched 33 percent on Oct. 27, the highest in at least nine years. Traders quote implied volatility, a gauge of expected swings in exchange rates, as part of option prices. Ending this week, the most Asian currencies were down against the dollar as investors remain risk averse amid the deteriorating global economic situation. The JPMorgan Asia Dollar Index, which tracks 10 Asian currencies, fell for a fifth week, the longest run of losses since September. INR may touch 50 if weakness persists in equities when Asian markets reopen in the middle of next week after Chinese New Year.

Technical Analysis: A very short term outlook on INR against US Dollar remains bearish in tandem with other Asian currencies.