Forex

Currencies daily fundamental outlook: USD, EUR, INR (November 16, 2009)

Contributed by Angel Broking

By Amar Singh, Reena Walia (Angel Broking)

USD:

- The Dollar Index weakened 0.6% last week as rise in risk appetite in the financial markets decreased demand for the low-yielding dollar. Concerns over the current interest rate scenario also hurt the sentiments for the dollar index.

- The role of the dollar as a reserve currency has come to the forefront and that is bearish for the dollar. Until there is a rise in interest rates in the US, the currency could continue to face downside pressure.

- The US Fed Chairman Ben Bernanke is expected to give his speech today, reassuring that interest rates will remain low for an extended period. This could lead to further weakness in the dollar as risk appetite could rise.

EUR:

- The Euro declined 0.5% against the dollar in last week's trade as a rise in risk appetite boosted demand for higher-yielding currencies. The overall trend in the Euro continues to remain up.

- But economic data indicated that the European economy returned to growth for the first time during the third-quarter of 2009 after five quarters of falling output. This positive data could boost further risk appetite and lead the Euro higher.

- The Eurozone is expected to release economic data on CPI ind Core CPI today. We expect the currency to appreciate in this week

INR:

- The Indian Rupee appreciated more than 1% last week as general weakness in the dollar coupled with hopes of continuing capital inflows in the country helped the currency trade higher.

- The benchmark equity index SENSEX gained a whopping 4% last week and that has been the main factor that supported the currency on the upside. Rise in equities raises hopes of inflows in the coming days and lifts the Rupee higher.

- A very important focus for today remains the speech by the Fed Chairman Ben Bernanke. Interest rates are expected to remain low and will continue to boost equities, thereby providing upside to the Rupee.