MoneyControl Currencies Analysis

    Frequently Asked Questions:
    1. Which currency will be stronger in 2023?
    2. How do you predict currency trends?
    3. Which currency is doing the best right now?
    4. Can Indian currency get stronger?

    Dilip Parmar,
Senior Research Analyst (Currency).The currency quote by Mr. Dilip Parmar,
    Senior Research Analyst (Currency).

    The rupee is hovering near a record low amid foreign fund outflows and a stronger greenback. The local rupee’s outperformance among its peers may continue on expectations of debt market dollar inflows, a strong macro environment and the central bank’s two-way intervention. The political stability and continuity of the existing govt. policy could further attract foreign inflows in the coming months.

    We believe there could be a slow and steady depreciation in the rupee amid dollar demand outpacing supply. From the level front, spot USDINR has support around 83.30 and resistance at 83.80.

    Latest Rupee Dollar Exchange Rate:

    1 USD = 83.5613 INR Jun 14, 2024, 01:26 UTC

    Trend Projected by Chanakya Research Team, for 13 June 2024
    Indian currency is expected to show rangebound trend/weakness Vs. US dollar
    Target 1      83.70
    Target 2      83.84
    Stop loss    83.42

    currency analysis for 13 Dec 2023
    moneycontrol

     

    Exclusive Currency Analysis by Kaynat Chainwala, Senior Manager-Commodity Research, Kotak Securities
    Kaynat Chainwala,
    Senior Manager-Commodity Research,
    Kotak Securities

    Fewer rate cuts and easing geo-political risks – a headwind for gold prices

    COMEX Gold prices saw a rollercoaster ride in April, as the yellow metal skyrocketed to an all-time high of $2448.8 per troy ounce (Rs.73,958 per 10 gram in MCX) during the first half of the month, aided by an escalation in geo-political tensions, robust Chinese demand for the metal and sharp rise in speculative buying. COMEX Silver prices also witnessed a similar move, rising to a 3 year high of $29.90 per troy ounce (MCX prices touched a fresh record high of Rs.86,126 per kg), tracking broad gains in bullion and industrial metals.

    After covertly fighting for decades, Iran and Israel saw a direct conflict in April as the latter’s missile strike on Iran’s consulate in Damascus killed Senior Iranian military leaders. Iran retaliated by launching hundreds of missiles and drones at Israel from its own territory, the first direct conflict between the two military powers in decades. This led to speculation that it would lead to a full blown war in the middle-east, home to a third of global oil supplies, boosting the safe haven demand. Meanwhile, The PBoC continued last year’s gold buying spree into Q1, reporting an addition of 27t to its gold reserves and turned a net buyer for the 17th consecutive month in March. Chinese ETFs have also seen good investor demand amid a rout in the nations property sector and stock market.

    The trend seen during the first half of the month reversed after the geo-political tensions eased, with the focus shifting to US inflation and Fed policy. Israel responded to Iran’ missile attack in a contained, symbolic manner, which was downplayed by Iran and bringing an end to the dramatic escalation for now. Meanwhile, US CPI data showed inflation rose 0.4% m/m in March, for the third consecutive month, indicating that the hotter readings at the start of the year were not an aberration and inflationary pressures are staying firm. Several Fed officials last month echoed the same in their comments and said that they are not in a hurry to cut interest rates, pointing to elevated inflation and resilient Jobs market. Swaps are now discounting just one rate cut this year, which is far below the roughly six seen at the start of 2024, and the three that Fed officials penciled in the March Summary of Economic Projections.

    During the May FOMC meeting Fed kept the rates steady for the sixth consecutive time, reduced the pace of QT and said that next move being a rate hike in unlikely. Geo-political situation improved as the US and Saudi Arabia are also nearing a historic pact that would offer the kingdom security guarantees and lay out a possible pathway to diplomatic ties with Israel, bringing more stability to the region. Investors now await April inflation and Jobs numbers for gauging the Fed’s policy trajectory and timeline for rate cuts.

    India’s Forex Reserves Fall $2.41 Billion to $637.92 Billion; 3rd Consecutive Weekly Decline

    In the third consecutive weekly decline, India’s forex reserves dropped $2.412 billion to $637.922 billion during the seven days ended April 26, according to the RBI data. In the previous reporting week, the overall foreign exchange reserves had declined $2.28 billion to $640.33 billion.

    For the week ended April 5, the forex reserves had hit an all-time high of $648.562 billion following multiple weeks of increases. The earlier high of $642.453 billion achieved in September 2021 got surpassed in March this year.

    For the week ended April 26, the foreign currency assets — a major component of the reserves — decreased $1.159 billion to $559.701 billion, the data released on Friday showed.

    Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.
    Gold reserves decreased $1.275 billion to $55.533 billion during the week. The special drawing rights (SDRs) were up $15 million to $18.048 billion, said the RBI.

    India’s reserve position with the IMF was also up $8 million to $4.639 billion in the reporting week, the apex bank data showed.

    Amit Goel, co-founder and chief global strategist at Pace 360, said, “In late April, India’s foreign exchange holdings declined by $2.41 billion, mostly due to the downward revaluation of gold and foreign currency assets. Gold reserves decreased by $1.28 billion, while foreign currency assets dropped by $1.16 billion.”

    Foreign institutional investors (FIIs) have been selling Indian equities, with net sales of more than $4 billion in April. This has been largely offset by Foreign Direct Investment (FDI) inflows and inflows from Foreign Portfolio Investors (FPIs) in the Indian bond market, he added.

    Sanjeev Agrawal, president of PHD Chamber of Commerce and Industry, said “Amid the geopolitical challenges and uncertain global economic climate, India’s foreign currency reserves stand intact at $637 billion bolstered by strong economic growth trajectory, attractiveness to international investors and robust export growth trajectory.”

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    Which currency will be stronger in 2023? moneycontrol

    The United Nations officially recognises 180 currencies worldwide as legal tender. However, popularity and wide usage do not necessarily equate to the value or strength commanded by a currency. The concept of currency strength revolves around the purchasing power of a nation’s currency when exchanged for goods, services, or other currencies.
    Currency strength is determined by evaluating the number of goods and services which can be purchased with one unit of the national currency and the amount of foreign currency obtained in exchange. A comprehensive analysis of various local and international factors is necessary to ascertain whether a currency holds the title of the most valuable or expensive in the world. These factors include supply and demand dynamics in the foreign exchange markets, inflation rates, domestic economic growth, the policies implemented by the relevant central bank, and the country’s overall economic stability.

    10.United States Dollar (USD)
    The currency of the United States of America is USD, or the US Dollar. It is the most widely traded currency globally and holds the position as the primary reserve currency. Despite its popularity, it ranks 10th among the world’s strongest currencies.
    Also Read: 1 USD to INR: From 1947 to 2023
    9: Euro (EUR)
    The Euro (EUR) is the official currency of the Eurozone, comprising 19 member states of the European Union. It is the second-largest reserve currency and the second-most traded currency worldwide. The euro stands as one of the strongest currencies, holding the 9th position.
    Also Read: Top 10 largest economies in the world in 2023
    8: Swiss Franc (CHF)
    The Swiss Franc (CHF) serves as the currency of Switzerland and Liechtenstein. Known for the stability of its economy, Switzerland is among the world’s wealthiest countries.
    7: Cayman Islands Dollar (KYD)
    The official currency of the Cayman Islands is the Cayman Islands Dollar (KYD). Although it ranks 7th among the strongest currencies, its value is the 5th highest globally. Initially using the Jamaican Dollar, the Cayman Islands adopted their own currency in 1972.
    Also Read: Top 10 richest countries in the world by GDP per capita in 2023
    6: Gibraltar Pound (GIP)
    The Gibraltar Pound (GIP) is the currency of Gibraltar, pegged at par value to the British pound sterling (GBP). As a British overseas territory, Gibraltar depends on sectors like tourism and e-gaming. The GIP holds the 6th position among the strongest currencies.
    5: British Pound (GBP)
    Great Britain uses the British Pound (GBP), which is also pretty broadly used in other countries and territories. As the world’s 5th strongest currency, it holds a significant place in global finance. London’s status as a financial hub and Britain’s extensive trade activities contribute to the strength of the pound.
    Also Read: World’s most powerful passport rankings 2023
    4: Jordanian Dinar (JOD)
    The Jordanian Dinar (JOD) has served as the currency of Jordan since it replaced the Palestinian pound in 1950. Jordan’s fixed exchange rates and diversified economy have contributed to the high value of its currency, ranking it as the 4th strongest globally.
    3: Omani Rial (OMR)
    The Omani Rial (OMR) is the currency of Oman and was introduced after the country ceased using the Indian Rupee as its official currency. As a country with significant oil reserves, Oman’s economy heavily relies on the oil sector. The Omani Rial, which is tied to the US dollar, is the third most valuable currency in the world.
    2: Bahraini Dinar (BHD)
    The Bahraini Dinar (BHD) serves as the currency of Bahrain, an island nation in the Arabian Gulf heavily reliant on oil exports. The BHD is pegged to the US Dollar and is exclusively used in Bahrain. With a strong expat community, including a significant number of Indians, the BHD holds the position as the second strongest currency globally.
    Also Read: Top 10 powerful countries in the world in 2023
    1: Kuwaiti Dinar (KWD)
    The highest-valued currency in the world is the Kuwaiti Dinar (KWD). Since it was first introduced in 1960, the Kuwaiti dinar has consistently ranked as the world’s most valuable currency. Kuwait’s economic stability, driven by its oil reserves and tax-free system, contributes to the high demand for its currency. Among Indian expats, the INR to KWD exchange rate is particularly popular.

    How do you predict currency trends? moneycontrol

    3 Common Ways to Forecast Currency Exchange Rates
    Purchasing Power Parity.
    Relative Economic Strength.
    Econometric Models of Forecasting Exchange Rates.

    Which currency is doing the best right now?

    The highest-valued currency in the world is the Kuwaiti Dinar (KWD). Since it was first introduced in 1960, the Kuwaiti dinar has consistently ranked as the world’s most valuable currency.

    Can Indian currency get stronger? moneycontrol
    6 reasons why many analysts expect Indian rupee could head towards 75/USD
    Higher the reserves, the more stable the currency. Conclusion: Other factors like unemployment, equity market strength, volatility in crude oil prices, and money supply affect exchange rates. Nonetheless, the INR has several factors aligned in its favor, and as a result, many analysts forecast the INR to strengthen by 2025.

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