The rupee ended weak against the US dollar on Tuesday as sell off continued in local stocks.The NIFTY benchmark index plunged 2.17% on Tuesday and DJIA fell almost 200 points in the overnight New York session. Indian markets were on a holiday on Wednesday observing Eid, so, USDINR is expected to see higher opening to replicate the development in the global market. The Nov contract on exchanges closed at 45.31, 11 paisa premium to the spot. The pair may open a 20 paisa plus and may see the Nov contract testing 45.65-45.70 today.
The Euro remained weak and fell almost 150 points from Monday closing. The EURUSD pair has been under pressure from past two weeks concerning Irish debt issue. The contagion risk took the spotlight during June after Greece was near bankruptcy. The EURUSD fell below 1.18 that time and has been recovering with improved market sentiment on austerity measures taken by PIIGS nations. The EURUSD recovered to almost 1.43 marks. Now, the fear is back again and it is going to put some pressure on Euro, may be at a limited pace.
The Irish debt issue can be contained but the fear is coming from Spain. According to market participants, Hedge funds have already begun to float to credit protection against Spanish bonds, expecting a crisis for Spain in the first quarter of next year. Few managers are trading with absolute conviction. Spain’s public debt as a proportion of GDP was 53 per cent at the end of last year, below the euro zone average of 79 per cent. It remains one of the lowest among the western economies in spite of heavy issuance in recent months.
Another point of concern for the market globally is the Chinese economic slowdown. China began to take steps towards reducing the growth of inflation in its economy. Reports showed that official inflation jumped to 4.4% in October from 3.6% in the previous month. Chinese tightening may dampen the global recovery phase. As per market expectations, rate tightening may be seen in the near term.
Under these circumstances, liquidation may be seen in global stocks, commodities as well as EM currencies. The US dollar may act as a flight of safety.
For today, we may see further pressure on the Indian rupee against the US dollar. The EURINR may stay weak but decline seems limited on firm USDINR.
The Euro remained weak and fell almost 150 points from Monday closing. The EURUSD pair has been under pressure from past two weeks concerning Irish debt issue. The contagion risk took the spotlight during June after Greece was near bankruptcy. The EURUSD fell below 1.18 that time and has been recovering with improved market sentiment on austerity measures taken by PIIGS nations. The EURUSD recovered to almost 1.43 marks. Now, the fear is back again and it is going to put some pressure on Euro, may be at a limited pace.
The Irish debt issue can be contained but the fear is coming from Spain. According to market participants, Hedge funds have already begun to float to credit protection against Spanish bonds, expecting a crisis for Spain in the first quarter of next year. Few managers are trading with absolute conviction. Spain’s public debt as a proportion of GDP was 53 per cent at the end of last year, below the euro zone average of 79 per cent. It remains one of the lowest among the western economies in spite of heavy issuance in recent months.
Another point of concern for the market globally is the Chinese economic slowdown. China began to take steps towards reducing the growth of inflation in its economy. Reports showed that official inflation jumped to 4.4% in October from 3.6% in the previous month. Chinese tightening may dampen the global recovery phase. As per market expectations, rate tightening may be seen in the near term.
Under these circumstances, liquidation may be seen in global stocks, commodities as well as EM currencies. The US dollar may act as a flight of safety.
For today, we may see further pressure on the Indian rupee against the US dollar. The EURINR may stay weak but decline seems limited on firm USDINR.
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