HSL PCG Currency Insight-Weekly

13 June, 2016

MARKET WRAP UP

WEEKLY MOVEMENT

Rupee Registered Biggest Weekly Gains since March

Currency

Currency
(Spot)
DXY Index

Last

Prev.
Close

Chg.

%
Chg.

94.5710

94.0290

0.5420

0.6%

EURUSD

1.1251

1.1367 -0.0116

-1.0%

GBPUSD

1.4257

1.4518 -0.0261

-1.8%

USDJPY

106.9700 106.5300

0.4400

0.4%
-0.7%

USDINR

66.7600

67.2600 -0.5000

EURINR

75.4819

74.9560

0.5259

0.7%

GBPINR

96.2632

96.9768 -0.7136

-0.7%

JPYINR

62.6000

61.8200

0.7800

1.3%

DGCX USDINR

66.7824

67.1186 -0.3362

-0.5%

NRI Remittances slips 87% in April on lower inflows from Gulf

countries

RBI Reference Rate

Last

Prev.
Close

Chg.

USDINR

66.7948

67.2415

-0.4467

-0.7%

EURINR

75.4714

74.9944

0.4770

0.6%

GBPINR

96.5719

96.9017

-0.3298

-0.3%

JPYINR

62.4000

61.8300

0.5700

0.9%

Prev.
Close

Chg.

%
Chg.

7.4890

0.0030

Currency

%
Chg.

GOI 10 Yr. Bond Yield

Instrument
759GS2026

Last
7.4920

0.0%

The prospects of faster economic growth and expectation for better

monsoon rains boosted the rupee value to mark biggest weekly gains
since March. On weekly basis, rupee appreciated 0.8% from 3 June to
66.76 a dollar, thats the biggest weekly jump since the period ended
18 March. At the fag end of the week, the currency gave away some
of its gain to close at 66.76 weaker by 0.1 %.
After, the Reserve Bank of India kept benchmark borrowing costs
unchanged at a five-year low on Tuesday. Indias sovereign bonds
were little changed in week the gone by, with the yield on notes due
January 2026 at 7.49%, prices from the central banks trading system
show. Thats the highest since 30 March.

Remittances by non-resident Indians (NRIs) fell 87% to $302 million in

April this year. The deposits stood at $2,406 million in the year-ago
period, according to the data. The biggest fall was registered in the
Non-Resident (External) Rupee Account (NR(E)RA) category, which
saw dip cut in inflows to $203 million in April. It was $2,200 million in
the year-ago period. As per the data, the 60% of Indias remittances
come from Gulf countries, which suffered the most due to decline in
crude oil prices.

Indias April IIP falls to 3 months low at -0.8%

Industrial output unexpectedly shrank by 0.8% in April, its first

contraction in three months following the poor performance of
manufacturing sector, government data showed on Friday. It was
expected to come at +0.8%, however March month number was
revised upward to 0.3% from provisional figure of 0.1%.
Manufacturing sector that contributes around 76% to total IIP dropped
to -3.1% in April from -1.0% of last month. Capital goods and
consumer non-durable good segments also remained under pressure
as both reported negative growth for the sixth consecutive month at
-25% and -9.7% respectively. Cable, rubber insulated, sugar and
cotton seed oil were the major contributors to the negative growth
while electricity and Jewellery added on positive side.

PRIVATE CLIENT GROUP [PCG]

Overseas Market
Dollar decoupled ahead of Fed decision

The dollar ended the week sharply higher against the other major currencies on Friday despite diminished expectations for a
summer rate hike by the Federal Reserve. The U.S. dollar index ended the week with gains of 0.56 to 94.558. The U.S.
currency rose for the fifth time in the past six weeks against the common currency. Technically, the dollar index is having
resistance of falling trend line around 96 while the sustainable closing below 93 will escalate toward 90.

Pound Tumbles for the second week as opinion polls signaling Leave

The depreciating for a second week as opinion polls had until Friday signaled the June 23 vote is too close to call. A poll
published late Friday showed the Leave campaign taking a 10 percentage-point lead, sending sterling plunging to its lowest
since April against the dollar. The latest U.K. poll conducted for Orb/Independent showed 55% leave, 45%remain. The pound
has had a volatile week before closing at 1.4255 down by 1.8%.

Week Ahead
Week Ahead: Fed-BOE-BOJ Rates Meeting, Brexit

Federal Reserve policy makers probably will hold off on raising interest rates in the coming week as they assess the U.S.
economy after weak May employment numbers and tepid first-quarter growth. Central banks in the UK, Japan and Indonesia
are among those making monetary policy decisions this week but all eyes are glued on the Federal Reserve.

On the domestic front, the main factors will be the movement of monsoon, release of wholesale and retail inflation will be in
focus.

WEEKLY PRICE - VOLUME - OI (PVO)

CURRENCY PAIR

NSE INRUSD Future Jun16

NSE EURINR Future Jun16
NSE GBPINR Future Jun16
NSE JPYINR Future Jun16

CLOSE

66.9375
75.6825
96.5250
62.6225

WKLY
% CHG.

(0.61)
0.33
(0.89)
0.61

OPEN
INTEREST

1764581
45838
50397
43208

PRIVATE CLIENT GROUP [PCG]

WKLY OI
% CHG.

24.2%
-18.1%
17.9%
22.5%

VOLUME

1323003
55636
80213
35353

WKLY VOL.
% CHG.

40.7%
11.5%
41.9%
45.7%

TECHNICAL OUTLOOK

USDINR JUNE FUTURE

Spot USDINR
Currency
Current Trend

Short Term
Consolidation

Trend Reversal

67.46

Support

66.70

Resistance

67.46

20 Days SMA

67.13

200 Days SMA

66.59

USDINR June [Link] : 66.94

Last
week,
USDINR
pair
reached its 200 DMA, took
support there and reversed the
trend.
Currently 200 DMA is placed at
66.77 for June Futures.
In the Month of April 2016, Pair
reversed the trend from bearish
to bullish.
Stochastic on the daily chart
has exited from the oversold
zone, indicating bullish reversal
Resistance for the pair are
placed at 67.26, 67.38 and
67.79.

View: Looking at the technical

evidences discussed above and
strength of the Dollar Index, we
believe
that
rupee
would
depreciate against dollar. SL in
Longs should be kept at 66.72

PRIVATE CLIENT GROUP [PCG]

DAILY CHART

TECHNICAL OUTLOOK

EURINR JUNE FUTURE

Spot EURINR
Currency
Current Trend

Short Term
Bearish

Trend Reversal

76.15

Support

74.53

Resistance

76.23

20 Days EMA

75.44

200 Days EMA

73.95

EURINR June Fut. CMP 75.68

Pair has formed lower top at

76.36, but for confirmation of a
bearish reversal lower bottom
has to be there, which would be
formed below 75.03.
Close below 75.03 in June
Futures would confirm the
breakdown in the pair.
Below 75.03, bearish head and
shoulder pattern on the daily
chart would confirm. Pair could
test the downside targets of
72.75 in the coming week.
Above 76.36, pair could go up
to 77.35 resistance

View: Traders can short the

pair only below 75.03 for the
target of 72.75. Existing longs
should be protected with a SL
of 75.03

PRIVATE CLIENT GROUP [PCG]

DAILY CHART

TECHNICAL OUTLOOK

GBPINR JUNE FUTURE

Spot GBPINR
Currency
Current Trend

Short Term
Bearish

Trend Reversal

98.11

Support

95.60

Resistance

98.11

20 Days EMA

97.56

200 Days EMA

98.11

GBPINR June [Link] : 96.52

Pair has already witnessed a fall

of almost 5% from the recent
high of 99.25 to 96.46.
Higher top and higher bottom is
still intact on the daily charts.
Any level below 95.95 would
violate the bullish pattern on
the short term chart.
Pair has violate the support of
50 DMA.
Immediate resistance for the
pair are seen at 98.31 and
99.25.
Supports for the pair are seen
at 95.95 and 93.70.

View: Bias for the pair remain

bearish. However existing long
should be protected with the SL
of 95.95 in Jun Futures.

PRIVATE CLIENT GROUP [PCG]

DAILY CHART

TECHNICAL OUTLOOK
Spot JPYINR
Currency

JPYINR JUNE FUTURE

DAILY CHART

Short Term

Current Trend

Bullish

Trend Reversal

61.40

Support

61.80

Resistance

63.50

20 Days EMA

61.62

200 Days EMA

57.57

JPYINR June [Link] : 62.62

Higher tops and higher bottoms

are intact on the daily chart.
Pair is hovering around its 52
week high of 63.09.
Pair is trading above all
important
moving
averages, indicating bullishness
on all time frames.
50 DMA has been acting as a
strong support. Currently 50
DMA is placed at 61.26.
Oscillators are holding their
bullish stance on daily and
weekly charts.
Immediate support for the pair
is seen at 61

View: Traders should remain

long and rather can initiate
longs with the upside targets of
63.09 and 64. Stoploss in long
should be kept at 61.

PRIVATE CLIENT GROUP [PCG]

EURUSD

DOLLAR INDEX
DXY: Daily Chart
Higher Low Formed

GBPUSD

EURUSD Daily Chart

USDJPY
USDJPY: Daily Chart

GBPUSD: Daily Chart

PRIVATE CLIENT GROUP [PCG]

USDINR JUNE MONTH OPTION DISTRIBUTION

OI in Thousands

USDINR OPTION OPEN INTEREST DISTRIBUTION

400
350
300
250

65.50

66.00

66.50

67.00
CALL OI

67.50

68.00

68.50

10.1

75.5

16.1

9.7

11.0

3.9

50

131.3

181.7

264.9

261.8

215.4

223.3

166.8

100

224.4

150

280.8

373.3

200

69.00

PUT OI

Data Interpretation:

Highest OI has been seen on 67.50 strike with Call and Put OI at 373.3 and 261.8 thousands, respectively.

In the week gone by, we had seen addition of 212 thousand contracts in 66.50 strike call while traders cut position by 213
thousand contract in 67.50 put.

Option distribution suggesting range of 67.50 to 66.50 in near term.

The put call ratio of Open Interest climbed to 0.86 from previous weeks 0.77.

PRIVATE CLIENT GROUP [PCG]

USDINR NEAR MONTH FUTURE ROLLING CHART(PRICE AND OPEN INTEREST)

Data Interpretation:

Last week, USDINR May future fell 0.61% to close at 66.9375 with OI addition of 24%.

We also noticed higher volume during the week. The near month USDINR volume jumped by 41% from previous week.

The fall in price with addition of volume and OI suggesting bearishness in the pair.

The broad range for the pair in coming days remain 67.50 to 66.50.

PRIVATE CLIENT GROUP [PCG]

INDIA FOREX RESERVE

Indian Foreign Exchange Reserves (US$ Billions)
Wkly Chg.

3-Jun

27-May

20-May

13-May

6-May

29-Apr

Total Reserves

3.27

363.46

360.19

360.91

361.03

361.99

363.12

Foreign Currency Assets

2.99

339.22

336.23

336.94

337.05

337.99

339.02

Gold

0.28

20.32

20.04

20.04

20.04

20.04

20.12

Special Drawing Rights

0.00

1.49

1.49

1.49

1.50

1.50

1.50

Position in IMF

0.00

2.42

2.42

2.43

2.43

2.45

2.47

FOREIGN FUND FLOW VS USDINR

Foreign Fund Buying Dragged

USDINR Lower

PRIVATE CLIENT GROUP [PCG]

MAJOR CURRENCIES
CURRENCY PAIR
DOLLAR INDEX SPOT
Euro Spot
British Pound Spot
Japanese Yen Spot
Indian Rupee Spot
Brazilian Real Spot
Australian Dollar Spot
South Korean Won Spot
S. African Rand Spot
Canadian Dollar Spot
Swiss Franc Spot

OPEN

HIGH

LOW

CLOSE

94.654
1.126
1.426
106.85
66.813
3.422
0.739
1172
15.248
1.275
0.965

94.750
1.126
1.427
106.98
66.883
3.447
0.739
1174
15.289
1.281
0.966

94.611
1.123
1.416
106.08
66.738
3.412
0.736
1172
15.176
1.273
0.963

94.687
1.124
1.419
106.12
66.760
3.420
0.737
1174
15.235
1.280
0.965

OPEN

HIGH

LOW

CLOSE

1275.59
17.34
48.85

1278.50
17.37
48.93

1272.56
17.13
48.21

1274.41
17.16
48.33

OPEN

HIGH

LOW

CLOSE

8180.3
26742.3
17938.8
2109.6
4915.1
6231.9
4390.8
10024.7
16319.1
20647.5
2897.3

8265.6
26972.1
17938.8
2109.6
4917.9
6231.9
4390.8
10026.5
16335.4
20664.6
2898.8

8162.9
26620.5
17812.3
2090.0
4880.6
6097.2
4301.1
9819.1
16101.4
20518.4
2886.3

8170.1
26635.8
17865.3
2096.1
4894.5
6115.8
4306.7
9834.6
16108.8
20555.2
2898.3

1 DAY
(% CHG)
0.12
(0.10)
(0.48)
0.80
(0.06)
(0.57)
0.00
(0.72)
(0.03)
(0.14)
0.02

5 DAY
(% CHG)
0.84
(1.01)
(1.75)
1.36
0.75
3.15
0.10
(0.58)
(2.15)
0.13
0.61

1 MONTH 3 MONTHS
(% CHG) (% CHG)
0.08
(1.54)
(0.61)
1.23
(1.23)
(0.79)
2.37
7.26
(0.12)
0.46
1.66
6.04
1.40
(1.89)
(0.19)
1.05
1.11
1.87
1.09
3.59
1.12
2.33

1 DAY
(% CHG)
0.01
(1.00)
(1.51)

5 DAY
(% CHG)
2.33
4.14
(2.74)

1 MONTH 3 MONTHS
(% CHG) (% CHG)
0.08
3.17
0.28
11.79
3.05
16.04

1 DAY
(% CHG)
(0.41)
(0.48)
(0.67)
(0.92)
(1.29)
(1.86)
(2.24)
(2.52)
(2.97)
(2.32)
(0.99)

5 DAY
(% CHG)
(0.62)
(0.77)
0.33
(0.15)
(0.97)
(1.51)
(2.60)
(2.66)
(2.84)
(1.87)
(0.92)

1 MONTH 3 MONTHS
(% CHG) (% CHG)
4.54
8.79
4.50
7.76
1.88
3.79
2.42
3.65
3.75
3.08
(0.37)
(0.39)
(0.31)
(4.14)
(1.19)
0.04
(1.85)
(4.90)
4.24
1.76
2.34
1.25

MAJOR COMMODITIES
COMMODITY
GOLD
SILVER
CRUDE OIL

MAJOR INDICES
INDEX
Nifty 50
S&P BSE SENSEX INDEX
DOW JONES INDUS. AVG
S&P 500 INDEX
NASDAQ COMPOSITE INDEX
FTSE 100 INDEX
CAC 40 INDEX
DAX INDEX
NIKKEI 225
HANG SENG INDEX
SHANGHAI SE COMPOSITE

PRIVATE CLIENT GROUP [PCG]

ECONOMIC EVENTS NEXT WEEK

Date Time

06/13/2016 17:30
06/10/2016 06/15
06/10/2016 06/30
06/13/2016 06/17
06/13/2016 06/17
06/13/2016 06/17
06/14/2016 10:00
06/14/2016 12:00
06/14/2016 14:00
06/14/2016 14:00
06/14/2016 14:30
06/14/2016 14:30
06/14/2016 18:00
06/15/2016 14:00
06/15/2016 14:00
06/15/2016 14:30
06/15/2016 16:30
06/15/2016 18:00
06/15/2016 18:45
06/15/2016 18:45
06/15/2016 18:45
06/15/2016 23:30
06/16/2016 01:30
06/16/2016 14:30
06/16/2016 14:30
06/16/2016 16:30
06/16/2016 16:30
06/16/2016 18:00
06/16/2016 18:00
06/16/2016 18:00

Country Event

IN
CH
IN
IN
IN
IN
JN
IN
UK
UK
EC
EC
US
UK
UK
EC
US
US
US
US
US
US
US
EC
EC
UK
UK
US
US
US

CPI YoY
Leading Index
BoP Current Account Balance
Trade Balance
Imports YoY
Exports YoY
Industrial Production YoY
Wholesale Prices YoY
CPI Core YoY
RPI YoY
Industrial Production WDA YoY
Employment YoY
Retail Sales Advance MoM
Claimant Count Rate
ILO Unemployment Rate 3Mths
Trade Balance SA
MBA Mortgage Applications
Empire Manufacturing
Industrial Production MoM
Capacity Utilization
Manufacturing (SIC) Production
FOMC Rate Decision (Upper Bound)
Net Long-term TIC Flows
CPI YoY
CPI Core YoY
Bank of England Bank Rate
BOE Asset Purchase Target
Current Account Balance
Initial Jobless Claims
Continuing Claims

PRIVATE CLIENT GROUP [PCG]

Period

May
Apr
1Q
May
May
May
Apr F
May
May
May
Apr
1Q
May
May
Apr
Apr
10-Jun
Jun
May
May
May
15-Jun
Apr
May F
May F
16-Jun
Jun
1Q
11-Jun
04-Jun

Survey

Prior

5.60%
-$1.80b
-$6025.0m
---0.50%
1.30%
1.50%
1.40%
-0.30%
2.10%
5.10%
21.5b
--4
-0.20%
75.20%
-0.10%
0.50%
--0.10%
0.80%
0.50%
375b
-$124.3b
270k
2140k

5.39%
99.1
-$7.07b
-$4844.9m
-23.10%
-6.70%
-3.50%
0.34%
1.20%
1.30%
0.20%
1.20%
1.30%
2.10%
5.10%
22.3b
9.30%
-9.02
0.70%
75.40%
0.30%
0.50%
$78.1b
-0.10%
0.80%
0.50%
375b
-$125.3b
264k
2095k

ECONOMIC EVENTS NEXT WEEK

Date Time

06/16/2016 18:00
06/16/2016 18:00
06/16/2016 19:30
06/16/2016
06/16/2016
06/17/2016 13:30
06/17/2016 13:30
06/17/2016 18:00
06/17/2016 18:00
06/20/2016 04:31
06/20/2016 05:20
06/20/2016 14:30

Country Event

US
US
US
JN
JN
EC
EC
US
US
UK
JN
EC

Philadelphia Fed Business Outlook

CPI YoY
NAHB Housing Market Index
BOJ Annual Rise in Monetary Base
BOJ Policy Rate
ECB Current Account SA
Current Account NSA
Housing Starts
Building Permits
Rightmove House Prices YoY
Trade Balance
Construction Output YoY

PRIVATE CLIENT GROUP [PCG]

Period

Jun
May
Jun
16-Jun
16-Jun
Apr
Apr
May
May
Jun
May
Apr

Survey

Prior

1.3
1.10%
59
----1150k
1145k
----

-1.8
1.10%
58
80t
-0.10%
27.3b
32.3b
1172k
1130k
7.80%
823.2b
-0.50%

KNOWLEDGE CENTRE
How Importers And Exporters Could Use A Forex Hedge To Minimise Losses
An important tool in the global financial markets, hedging is used in every asset class to mitigate losses. This can be
utilised by anyone, whether it is an individual or corporate, to overcome the negative impact of price volatility.
For the corporate in which the business activity is dependent on import and export of commodities, there is an
automatic exposure to foreign exchange and, hence, the need for hedging is higher. In the current context, since the
world markets are interlinked, they eventually affect and impact the movement of currencies.
Hedging, in any asset class, is ultimately a strategy to decrease or transfer risk in order to protect one's portfolio or
business from uncertainty in prices. In case of hedging in the foreign exchange market, a participant who is entering
a trade with the intention of protecting the existing position from an unexpected currency move, is said to have
created a forex hedge.
With the help of a forex hedge, a participant who is long in a foreign currency pair, can protect himself from the
downside risk. On the other hand, a hedger who is short on a foreign currency pair will protect his existing position
from the upside risk.
The strategy to create a hedge would depend on the following parameters: (a) risk component (b) risk tolerance and
(c) to plan and execute the strategy.
The impact of the movement in the USD-INR currencies affects both importers and exporters. In other words, an
importer will benefit when the rupee appreciates, while the exporter will gain when the rupee depreciates against the
US dollar. The cost of import reduces when the rupee gains strength, thus benefiting an importer, and at the same
time creating a loss for the exporter, since a stronger rupee will reduce the export remittances when converted to
Indian rupees.
In order to reduce the risks associated with these uncertain movements in the financial markets, both importers and
exporters can utilize the derivatives platform of currency futures. By creating an equal and opposite position in the
derivatives market, a hedge can be created.

PRIVATE CLIENT GROUP [PCG]

KNOWLEDGE CENTRE
How Hedging Works For An Importer
Suppose an oil importer wants to purchase oil worth $1,00,000 and places his order on 11 March 2016, with the
delivery date being three months away. At the time of placing the contract in the spot market, one US dollar is
worth, say, Rs 66.50. However, suppose the Indian rupee depreciates to Rs 69 per dollar when the payment is due in
June 2016, the value of the payment for the importer goes up to Rs 69,00,000 rather than Rs 66,50,000.
In this case, if the importer hedges the currency risk, the losses can be reduced. Here's how the hedging strategy for
the importer would work:
Buy 100 lots of USD June 2016 contracts on 11th March 2016, assuming that June 2016 contract is trading at 67 on
11th March 2016.
Then in June 2016, He square off 100 lots USD at 69. Profit of Rs. 200000, i.e. 1000 lot size* (69-67) *100.
Then importer makes the payment of oil purchase at 69 per dollar
Had the importer not hedged his position, he would have suffered a loss of Rs 2,50,000 (Rs 69,00,000 - Rs
66,50,000). However, by creating a hedge position on the futures platform, his losses were reduced to Rs 50,000 due
to profits in currency hedge.
How An Exporter Can Use Hedging
A Jeweller, who is exporting gold jewellery worth US$50,000 in March 2016, wants protection against a possible
appreciation in the Indian rupee in June 2016 (spot Rs 66.50), when he receives his payment. When he is required to
make the payment in June 2016, suppose the rupee appreciates to 64. If, in this situation, he wants to lock in the
exchange rate for the above transaction, his strategy would be as follows
In March 2016, Sell 50 lots of June 2016 contract USD with a lot size of 1000,spot market @66.50. Assume that
initially the Indian rupee depreciated, but later appreciated to 64 per USD as foreseen by the exporter at end of June
2016.
Had the exporter not hedged his position, he would have suffered a loss of Rs 75,000, i.e. (50*1000*(66.50-64)), but
by creating a hedge he has made a profit of Rs 75,000 in the futures, offsetting his business loss. Hence, exposure
management is essential, given the premise of a volatile foreign exchange market. Hedging in the currency
markets, therefore, holds prime importance.

PRIVATE CLIENT GROUP [PCG]

Technical Research Analyst(Equity and Currency): Vinay Rajani ([Link]@[Link])

Research Analyst(Currency): Dilip Parmar ([Link]@[Link])
HDFC securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg (East), Mumbai 400 042
HDFC securities Limited, 4th Floor, Above HDFC Bank, Astral Tower, Nr. Mithakadi 6 Road, Navrangpura, Ahmedabad-380009, Gujarat.
Phone: (079) 66090040 /66070168, Website: [Link] Email: [Link]@[Link]
"HDFC Securities Ltd. is a SEBI Registered Research Analyst having registration no. INH000002475."
Disclosure:
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This report has been prepared by the PCG Research team of HDFC Securities Ltd. The views, opinions, estimates, ratings, target price, entry prices and/or other parameters mentioned in this
document may or may not match or may be contrary with those of the other Research teams (Institutional, Retail) of HDFC Securities Ltd.

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