TradeDaily Currency Reports 17-06-2009

Global Markets:

The U.S. dollar fell across the board on Tuesday, pressured by
Russian angling for a new global reserve currency, while stocks
fell on renewed worries whether the ailing world economy was
on the path to recovery. Oil gave back early gains as the dollar
strengthened while U.S. Treasury bond prices rose after the
Federal Reserve bought a surprisingly large $6.5 billion in government
debt.
Concerns that the pace of economic recovery may be more
tepid than initially thought, forced a retreat in a broad equity
advance in Europe and the United States.
While U.S. housing starts in May rebounded and producer prices
rose less than expected, suggesting inflation pressures were
muted, another report showed industrial production logged a
steeper-than-expected slide last month. A Federal Reserve report
also said the capacity utilization rate in May for total industry,
a measure of slack in the U.S. economy, slumped to its lowest
on records dating back to 1967.
Other markets also flipped around midday as the perceived outlook
for the U.S. economy turned darker. The Dow average
closed down 107.46 points, or 1.25 percent, at 8,504.67.The
mixed bag of data was seen as positive for bonds, a traditional
safe haven, as it suggested there are ample hurdles the economy
must overcome before the recession can end.
The dollar fell on comments by Russian President Dmitry Medvedev
suggesting a need for a global reserve currency other than
the greenback. Gold rose in Europe, benefiting from its appeal as
a hedge against potential inflation on the upturn in crude prices.
Copper ended down as investors worried that a recent sharp
run-up in commodity prices might have exceeded fundamentals
in the face of the mixed economic data.


The INR: View Point

The Indian rupee recovered some of its early losses on
Tuesday, helped by fall in the dollar versus major currencies
and a rise in the domestic share market which raised
hopes for more foreign fund inflows. The dollar index, a
gauge of the U.S. unit's performance versus majors, was
down 0.9%, after what was seen as dollar-negative comments
from Russia again. One-month offshore nondeliverable
forward contracts were quoting at 47.91/48.01,
weaker than the onshore spot rate, indicating a slightly
bearish outlook in the near term.
However if the “correlation” of the Rupee with the USDX
is “true”- and as we see clear evidence that the USDX is
set to strengthen, then we may expect the Rupee to
weaken too in the interim. Therefore we need to see how
the resistance at 47.90-48.05 holds up. Over this mark, the
move could extend to at least 48.40-50.
We have shown below, how the inverted H&S formation
has been possibly triggered and now it is likely to be in a
trending mode higher. Therefore we may expect the 47.50
support to hold and become the base for a higher Dollar.