Forex - India Preview: due 12-Feb - January CPI to remain near recent lows

 01:00 (GMT) 08 Feb

  [Economic Data]

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India Preview: due 12-Feb - January CPI to remain near recent lows (0101-HRTC-C01)

India's January inflation print is scheduled for release after the close of markets on 12th February, and we expect CPI to remain near recent lows to come in at 2.25% y/y vs. 2.19% y/y in the preceding month. Food prices continued to weigh on headline inflation, although a lower base may help to offset some of the pressures. The rupee also remained weak against the USD in January, compared to gains in most of the other Asian currencies, which possibly lifted some of the pressure.

We expect a further recovery in headline inflation in the coming months, but it should continue to remain soft. Some inflationary impact is also seen from the populist budget announcement on Feb 1st. The central bank however delivered a surprise rate cut at the February meeting due to the persistent low inflation, and the March quarter inflation is expected to average around 2.8% y/y.

Forex - Flows: Net Foreign Equity Flows on Thu

 00:33 (GMT) 08 Feb

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Forex - Asia Close Highlights

 09:12 (GMT) 07 Feb

 [Forex Highlights]

07 February 2019

Regional Backdrop:

Some Asian currencies weakened on Thursday as China and related markets were closed. KRW and IDR lost 0.45% and 0.39% respectively, while THB registered a 0.11% loss. MYR was the outperformer with 0.5% increase, while INR gained 0.1% on the back of a RBI cut. PHP, SGD, CNH strengthened a little. Markets were focused on earnings and US-China trade developments, with the US stating some progress in talks. RBI's surprise rate cut may signal towards a dovish shift in the region. This may affect currency movements as investors start to examine central bank stances in Asia more closely.

USD/CNH saw a slip to an intra-day low at 6.7698, before bouncing back up immediately to trade at 6.7846 at last look. China's markets remain closed for the long Lunar New Year holidays and will resume this upcoming Monday.

USD/SGD printed a 2-week high at 1.3564 at the beginning of Thursday's Asian session, before seeing a slip to an intra-day low at 1.3545. However, the slip was short-lived as pair rallied immediately to erase all the losses and was trading at 1.3557 at last look. U.S. weekly initial jobless claims data will be out on Thursday NY hours. Markets are expecting the number of people filing for unemployment benefits to decline by 32,000 to 221,000. A positive labour data will exert additional upward pressure on the pair.

USD/IDR onshore spot gapped higher to open at 13930 on Thursday vs. previous close of 13920, and rallied to intraday highs of 13988 as the USD was bid the night before from a lower than expected trade deficit and a weaker EUR. A recovery in oil prices also weighed on IDR sentiment, and China onshore markets remain close this week for CNY. Pair however retreated slightly to move below 13980 into the close.

USD/INR onshore spot gapped higher to open at 71.7275 on Thursday vs. last close of 71.5525 amid gains in oil prices the previous night, as well as a stronger USD following the trade deficit contraction. Pair however peaked at 71.7500 soon after and traded lower to 71.6000 as the RBI decision was awaited. A knee-jerk t 71.3300 was seen after the surprise rate cut, but pair could not sustain the move below 71.50.

Market Psychology

USD/CNH - Eyes are on the 6.7853 resistance next.

USD/SGD - Eyes are on the 1.3569 resistance, a break above will turn our attention to the 1.3600 resistance.

USD/IDR - Moves towards 14000 could prompt good opportunity to go long rupiah, with further trade talks eyed next week.

USD/INR - We believe the upside will remain in focus, although sellers above 72 should keep a consolidative tone in place for now.

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