Best Stocks to Buy – USD/INR Drifted Lower By Global Rally In Stocks And Sharply Lower USD Index
The downtrend in continues and the currency pair opened the week sharply lower at 73.35, registering a steep decline of 16 paise/USD over its Friday’s close. After reckoning the overall covid situation in the country, the downtrend in the US dollar against the rupee seems to have been overextended and a possible correction is likely on the cards. It now seems the local currency and stock markets are completely ignoring the adverse developments on the covid front but takes the lead and guidance from the trends and developments in the global markets.
The continuing upside rally in the rupee seems to be overdriven without recognizing the damage being created by the virus on the economy from all fronts viz., job losses, lower GDP growth, high fiscal imbalance, higher inflation besides the prevailing depressed real interest rates. The rupee’s sharp gains posted in the recent weeks can be attributed to exporter-selling, the dollar’s steep decline and volatilities in the forward dollar premia.
In the current scenario of portfolio outflows of about USD 2.2 billion from the beginning of April 2021 till Friday last week, we believe the dollar-supply/demand position and the Central Bank’s intervention policy guide the direction of the domestic currency. The overvalued currency in terms of fundamentals could slow down the export growth over the medium-term which could lead to a widening of the trade deficit in the background of global oil prices creeping higher due to anticipated higher demand from the US and China.
April jobs data showed only 266,000 jobs were created in April against the market expectation of just under a million jobs creation. Data for March was revised down to show 770,000 jobs added instead of 916,000 as previously reported. The unemployment rate rose to 6.1% from 6% in March against the analyst’s expectation of a fall to 5.8%. The jobs data created shock waves which led to a jump in commodity prices and global equity indexes scaled a new peak on Friday. The and hit new peaks. US interest rates are expected to stay at ultra-low levels for quite a while and that is going to keep the dollar under pressure. The US yields also dropped to end the week at 1.58650%.
The country’s forex reserves rose from USD 3.91 billion to reach USD 588.02 billion in the week ended 30-4-21 which is close to the reserves position as of 31-3-21. Hence the actual accretion in the forex reserves is almost unchanged in the interim period between 31-3-21 to 30-4-21.
The dollar languished near a more than 2-month low versus major peers on Monday as investors continued to assess the implication for monetary policy of a disappointing US unemployment report. The registered a 2-month low of 90.13 and currently trading at 90.27. Euro, GBP and JPY were the major gainers of the dollar’s weakness