Buy USDINR; target of 71.65 – 71.75: ICICI Direct

ICICI Direct’s currency report on USDINR

Spot Currency

The rupee continued to make record lows ending Tuesday at $ / 71. 57 as profit booking in domestic equities coupled with strength in the US $ weighed. It is expected to open mildly higher today. However, gains would be capped amid news of a slump in the South African economy and Indonesian rupiah slump • The dollar index posted mild gains against major currencies amid profit booking in the Japanese Yen and euro. US manufacturing PMI data for August was robust at 54. 7 boosting the US $ and yields. Traders would be tracking US trade data due today in the backdrop of a widening trade rift between the US and China.

Benchmark yield

Sovereign bonds witnessed profit booking as a surge in crude oil prices as well as a weakening rupee risked FII outflow pressures from domestic debt markets. The 10 – year sovereign yields rose to highest levels since December 2014 amid higher oil prices • US sovereign 10 – year bond yields were higher at 2. 90 % ahead of US trade data today .US employment data shall stay in focus as Fed is on course to raise interest rates in September monetary policy meet.

Currency futures on NSE

The dollar – rupee September contract on the NSE was at 71. 70 in the previous session. September contract open interest increased 7. 86 % in the previous session • We expect the US$INR to find supports at lower levels. Utilise downsides in the pair to initiate long positions.

Intra-day strategy