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CURRENCIES WITH MECKLAI FINANCIAL.
18 January 2021
Monday
Currencies Wobble Ahead of Biden’s oath ceremony.
The Indian ended last week stronger at 73.12 levels. The weaker dollar index, stronger foreign fund inflows, higher equities and recovery in local economy altogether helped rupee. The movement in local unit was in tandem with other Asian peers and going ahead the optimism over US stimulus package will keep it lower.
As India starts the 1st around of covid vaccination, traders say that there may be swings in certain specific stocks. The first Covid-19 vaccine shots in India were given on Saturday to nearly two lakh frontline healthcare and sanitary workers.
Trends in Brent crude prices, the rupee, and foreign investment patterns will remain key monitories for investors.
On the economic front, the provisional figures of Wholesale Price Index (WPI) revealed that the rate of inflation, based on monthly WPI, stood at 1.22% for the month of December, 2020 (over December, 2019) as compared to 2.76% during the corresponding month of the previous year.
The Reserve Bank of India (RBI) has projected the Indian economy to contract 7.5 per cent in the current financial year, while the National Statistical Office (NSO) estimates a contraction of 7.7 per cent.
Last week, we didn't see much volatility, also RBI's participation in spot was subdued, however next week we can expect volatility to pick up ahead of Biden's oath taking ceremony. It may not be long before we see more significant profit taking in equities and currencies. The signs are there – stocks hover near record highs but are struggling to extend their gains. Equities consolidated for the fifth straight day but currencies and Treasury yields are beginning to sell-off.
Concerns about violence on inauguration day and worries about President-elect Biden’s new policies would also be reasons for profit taking in equities but both effects will be short-lived. Senator Mitch McConnell said he will not bring the Senate back early, which means if the President were to be impeached, it would be after he leaves office so at minimum that uncertainty won’t be an issue for stocks. Speculation over announcements that may be made in the upcoming Union Budget on February 1 may also lead to some volatility in the domestic stock markets, even as most investors take their cues from the ongoing earnings announcements from India Inc for the third quarter.
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