Do I know what INR will do over next one year? Hell No. I have no idea. But I can tell you what INR has been doing and what hints we can take from the current situation.
Number 1: INR has a very stiff ceiling (read resistance) near levels of 69
Whenever there has been perceived economic crisis in last 4 years: USDINR has rallied to levels near 69 and retreated. With every retreat, USDINR has strengthened the resistance of 69. It means it will take enormous crisis, probably bigger than last 3, for USDINR to break 69
Number 2: 2017 has been great year for Emerging market and INR
2016 Nov was extremely bad for INR because of Trump Victory and demonetization crisis but in 2017 - INR has made a spectacular comeback - sharp appreciation from crisis levels of 69 all the way to 64. It looks a welcome comeback for INR
Number 3: The INR volatility has disappeared for now and for good reason
It has been 3 months now and INR is stuck in 1 rupee range. The volatility has collapsed for right reasons. Any appreciation from current levels will be counterproductive for the economy. Hence I am not surprised. I have started this number of times
Strength in INR will make "Make in India" unviable in many sectors....this is big negative for job creation https://t.co/uV3s5fjgZu
— Deepak Singh (@smarket) April 6, 2017
Number 4: Technically - USDINR is at major major support level
As any depreciation above 69 would have been inflationary - any appreciation below 64 can worsen job creation in the economy. Technically, this level also coincides with 200-week moving average which is considered as long term support. Hence Technically and fundamentally speaking: USDINR seems well set to spend rest of the time between 64 and 69 and it's good for Indian economy
Number 5: A strong currency is not good all the time
You need strong INR when you are worried about Inflation. A strong INR when Global growth is picking up is stupidity.
— Deepak Singh (@smarket) June 8, 2017
INR has been one of the most stable currencies since September 2013....
— Deepak Singh (@smarket) April 26, 2017
Economic policy is never about number.
It's about what objectives Govt want to accomplish. At this point of time when inflation is at all time low - job creation and economic growth is major issue. With Global growth picking up, stable and little weak currency will help a lot. Hence, fundamentally INR should trade between 64 and 69 and it's great to see USDINR doing that price action wise. But if INR strengthens and slips below 63.5, then one cannot rule out INR strengthening to 60.
That will not be good news for Indian economy but you never know. We have to be in sync with market all the time
Do let me know your views
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers