Forex

Currencies daily fundamental outlook: USD, EUR, JPY, INR (November 6, 2009)

Contributed by Angel Broking

By Amar Singh, Reena Walia (Angel Broking)

USD:

- The Dollar Index weakened on Thursday as a rise in risk appetite led to higher equities and decreased demand for the dollar. US equities traded higher as jobless claims declined and boosted economic optimism in the financial markets.

- The currency did not show a sharp movement yesterday as markets await economic data on non-farm employment change and unemployment rate today. Unemployment rate is expected to rise to 9.9% in October and may raise concerns over the pace of the economic recovery.

- We expect the Dollar Index to rise today as a rise in unemployment would mean that the US economy still has a long way to go. This would lead to risk aversion in the financial markets and thereby higher demand for the safe-haven dollar.

- On a week-on-week basis, the dollar index is expected to end on a weaker note against the Previous week.

EUR:

- The Euro gained against the dollar on Thursday and touched a session high of 1.4917 after the European Cential Bank (ECB) president Trichet said that the Eurozone economy will recover at a gradual pace.

- The ECB kept interest rates unchanged at a recoid low of 1%. The president added that latest evidence suggests a pick-up in activity in the second half of this year and that extra liquidity measures will be phased out in a timely manner.

- The comments by the ECB indicated an optimistic growth outlook. The Euro could come under pressure today if US unemployment data comes weak as it would lead to risk aversion in the financial markets and pull investors towards low-yielding currencies like the Dollar or the Yen.

JPY:

- The Japanese Yen appreciated sfightly against the dollar on Thursday as Japanese stocks declined in the early part of the trade amid concerns that the global economic lecovery will be slow and that boosted demand for the Japanese currency as a refuge.

- The currency also advanced yesterday, ahead of ?? unemployment report in the US today as bearish data could lead to risk aversion in the financial maikets. This would fuither boost demand for low-yielding cuirencies Like the Yen.

- The Japanese economy is expected to provide economic data on leading indicatois which is expected to improve. If the data cornes in as per expectations then the gain in the Yen could be capped as it could boost economic optimism.

INR:

- The Indian Rupee appreciated yesterday and trimmed its fall on Thursday as a rise in domestic equities helped the currency recover. The benchmark Indian equity index SENSEX gained 151  points and closed above the 16,000 mark.

- Equities have witnessed gains in the last two days and that has helped  ease concerns  over capital outflows from the economy. Overseas funds have added to their holdings of Indian equities in each of the last eight weeks, taking net purchases for the year to $14.2 billion on 3rd Nov.

- We feel that the Rupee could come under pressure in the next two - three sessions as crude oil prices are rising and that could raise worries over increased dollar purchases by the nation's refiners.

- But sharp depreciation in the Rupee could be protected by a bounce back in the equity markets.