Source: Sushil Finance

USDINR

The dollar edged up against major currencies on Monday, on expectations for further stimulus from the European Central Bank in what has been a strong month for the greenback.

Trading was subdued during Monday’s session, with the dollar moving in tight ranges against most rivals. The index has risen more than 3 percent this month, backed largely by anticipated policy divergence between the ECB and U.S. Federal Reserve.

Friday’s jobs report, should it meet expectations, would boost expectations for a Fed interest-rate increase.

By contrast, the Fed is expected to raise U.S. interest rates for the first time in almost a decade later in December, based on a succession of data shows the U.S. economy growing at a healthy pace.

The IMF announced on Monday it had decided to include China’s yuan, or renminbi, in its special drawing rights currency. The move should bolster the yuan’s political clout and standing as a global currency, analysts said.

Outlook

The Indian rupee will likely open higher against the dollar, buoyed by a better-than-expected economic growth in the July-September quarter. However, traders are likely to stay on the sidelines ahead of the Reserve Bank of India’s bi-monthly monetary policy review later.

 

EURINR

Euro zone central bank officials are considering options such as whether to stagger charges on banks hoarding cash or to buy more debt ahead of the next European Central Bank meeting, according to officials.

Little over a week before the meeting to set the ECB’s policy course, numerous alternatives are open, from snapping up the bonds of towns and regions to introducing a two-tier penalty charge on banks that park money with the ECB.

Officials, who spoke on condition of anonymity, said that even buying rebundled loans at risk of non-payment has been discussed in preparatory meetings, although such a radical step is highly unlikely for now. The ECB declined to comment.

“They are still trying to figure out what will be in the package. A lot of people have different views,” said one official with knowledge of talks that have put ECB President Mario Draghi at loggerheads with sceptical German policy-makers.

“There are some who say you should surprise markets. But you cannot surprise indefinitely.Sooner or later, you are bound to disappoint.”

A virtually stagnant euro zone economy and a heightened sense of concern at the ECB sets the backdrop for a series of high-level meetings of central bank officials in Frankfurt that take place this week.

Outlook

We expect EURINR to trade negative on the back of dovish ECB.

 

GBPINR

Sterling dipped below $1.50 for the first time since April on Monday after a policymaker warned about the impact of a strong pound on inflation, but rebounded slightly as the dollar slipped on soft U.S. data.

The newest member of the Bank of England’s monetary policy committee (MPC), Gertjan Vlieghe, said in a newspaper interview over the weekend that the tightening effect of a strong pound was “huge” and that he wanted to see growth stabilise or pick up before interest rates started to rise.

That is mostly because the euro, the currency of Britain’s biggest trading partner, has been driven sharply lower by a huge stimulus programme from the European Central Bank.

It meets on Thursday and is expected to ease policy further, which is likely to drive the single currency down lower still.

Outlook

We expect GBPINR to trade negative on the back of dovish BoE.

 
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