-- Posted Friday, 21 October 2011 | | Disqus
Rupee has weakened to 50.18 against the US dollar as I prepare this report on the back of investor withdrawal from India and other emerging markets. Risk aversion is the norm after the European sovereign debt woes and their leader’s inability to get a quick solution to the bailout of Greece and other rogue eurozone nations. Add to the global woes we have the Indian economic problems of a lower growth, very high fiscal deficit, high inflation and interest rate hikes not get getting over.
But still the Indian economy is better off than most of its global peers. A weaker rupee will only add to imported inflation which the government will not tolerate. Rupees will not sustain over 50.00 against the US dollar for a long time. Even if the conditions are adverse the Reserve bank of India will intervene at some point of time. The benefits of having a high foreign exchange reserve is that the RBI if it wants can curb the current weakness for a few weeks to a few months. Technically 50.30 is the resistance and if the rupee opens over 50.30 against the US dollar on Monday then it can rise to 52.20 and over in the short term. On the lower side 48.30 is the key medium support.
Month end demand of October and short covering are also the reason for rupee weakness against the US dollar. If the rupee floats over 50.50 after mid November 2011 then we expect the weakness to continue for at least six weeks.
We prefer selling three months forward and one year forwards. The three month forward premia is at 61.75 paise and one year forward premia is at 133 paisa which is also attractive.
A BIT ON EURO-DOLLAR
Euro can rise to 1.4099 and 1.4450 in the short term once the European bailout has been agreed and implemented. But weaker fundamentals will push it lower to 1.3210 and 1.2700 in the long term. US economic fundamentals seem to be catching up with European counter parts which will only support the US dollar. Technically 1.3390 (400 week MA) is the long term support and as long as euro/usd trades over it will target the 1.4500-1.5200 zone. There will be a technical break down only if euro/usd floats below 1.3390 for a week all the way to 1.2175
HAVE A GREAT WEEKEND AND HAPPY DIWALI TO EVERY ONE
Disclaimer: Any opinions as to the commentary, market information, and future direction of prices of specific currencies, metals and commodities reflect the views of the individual analyst, In no event shall Insignia Consultants or its employees have any liability for any losses incurred in connection with any decision made, action or inaction taken by any party in reliance upon the information provided in this material; or in any delays, inaccuracies, errors in, or omissions of Information. Nothing in this article is, or should be construed as, investment advice. Prepared By Chintan Karnani. Website www.insigniaconsultants.in
-- Posted Friday, 21 October 2011 | Digg This Article
| Source: GoldSeek.com
