Forex - India Flows: USD/INR Recovers, Bonds, RBI Sees Growth, Investment Risks; JSW New Hope.

USD/INR gapped down at open to 49.66 lows (vs yest close at 49.82) before importers' stepped in to buoy the pair towards 49.75 anew. Still offers at upticks was the preferred strategy on the pair ahead of RBI mid-quarterly meet due later today where a 25bps hike is widely expected. 50.00 marks the first upside target and is likely to be breached if post-decision comments still carry strongly hawkish leaning. SENSEX up 0.5%. Bond yields due 2022, meanwhile pulled back to 8.81% after RBI's Macroeconomic and Monetary Developments Second Quarter Review 2011-12 released late Mon saw the cenbank allude to rising growth risks alongside stickiness in inflation. RBI also highlighted concerns over pipeline investments which are expected to shrink in FY12, pressuring growth a year hence as well. Separately top govt adviser Sen said the economy could grow more than 8% in FY12 as IP growth is 'hugely underestimated' (Rtrs). On the side, JSW Steel Ltd plans to bid for Australia's coal miner New Hope Corp, in a deal worth USD 5bn, accordg to newswire reports. All eyes on RBI action later today. RR

* 25 Oct 11: 03:35 GMT - EMGA FX CHART USD/INR Update: Scope for deeper pullback.

Shooting-star set last Friday is inspiring current pullback and enforced by the negative crossing seen on daily stochastic and set for deeper extension to 49.570 ahead of 49.475. Only a swing above the 50.320 strong resistance to resume uptrend and target initial objective at 50.400 then 50.590.

R5: 50.67 8 Apr 2009 high

R4: 50.59 * 21 Apr 2009 high

R3: 50.40 objective of triangle

R2: 50.32 * 21 Oct high

R1: 50.005 24 Oct high

S1: 49.57 3 Oct high

S2: 49.475 12 Oct high

S3: 49.365 * 20 Oct low

S4: 49.06 18 Oct low

S5: 48.68 17 Oct low

* 24 Oct 11: 09:11 GMT (SGA) - EMGA INR FX FLOWS - USD/INR nears 50.00 on slippery EUR; RBI meets tom

EUR pullback in late Far East Asian hours coupled with importers' bids sent USD/INR to the firmer end of traded range today. Pair traded within reach of 50 figure as we write, off day lows at 49.80. SENSEX trimmed gains to 1.2% at last look. In focus is tomorrow's RBI policy decision where we expect the rates to be tightened by another 25bps, with markets expected to watch for post-meet comments closely to gauge RBI's inclination on policy thereafter. We reckon that the end of the tightening cycle is near, with increasing odds of pause after Tue's hike (for our preview, please search RBI+data+INR). RR

* 24 Oct 11: 04:17 GMT (SGA) - EMGA INR FX FLOWS - USD/INR; Fitch on govt fuel subsidies; FX res up USD 5bn

USD/INR opened below 50.00 mark on Mon, with narrow 49.80-49.925 tested so far (vs Fris' close at 50.02). This marks a notable pullback from 50.32 highs - two and half year highs - tested on Fri, though we expect caution ahead of RBI meet tom and comments out of Eurozone summit on Wed to underpin pairing in the near-term. Initial support is seen at 49.75, ahead of chart's distant 49.57, with the first to mark the near-term floor. SENSEX meanwhile joined the regional rally to rise 1.8% at last indication, though might lose ground later in the day as market consensus backs 25bps hike tom (for our views please search RBI+INR+preview). Bond yields due 2022 rose to 8.89% as we write on supply and rate hike worries. Meanwhile Fitch's Abhinav Goel cautioned that even as "high crude oil prices and a depreciating INR contributed to increased under-recoveries, policy reforms to reduce quantum of under-recoveries and improve timeliness of subsidy remain key issues" for the government. The official however added that the ratings of the oil cos. remain stable, with an eye on govt's plans on subsidies. Of note elsewhere FX reserves in week ended 14 Oct rose by USD 5.3bn to USD 317.5bn much due to favourable FX valuation effects. Our market sources also cited Asian central banks', India in particular as steady buyers of GBP in recent weeks, which could be a bid to diversify FX reserves. RR

* 24 Oct 11: 04:15 GMT - EMGA FX CHART USD/INR Update: Shooting-star inspiring corrective pullback.

The bullish breakout of symmetrical-triangle last week triggered an upmove to 50.320 high last Friday, falling short of the 50.400 projected target of this triangle and sharp sell-off towards closing in the appearance of a shooting-star is setting tone for corrective pullback, eyeing next support at 49.570 ahead of 49.475.

R5: 50.67 8 Apr 2009 high

R4: 50.59 * 21 Apr 2009 high

R3: 50.40 objective of triangle

R2: 50.32 * 21 Oct high

R1: 50.135 intraday level

S1: 49.57 3 Oct high

S2: 49.475 12 Oct high

S3: 49.365 * 20 Oct low

S4: 49.06 18 Oct low

S5: 48.68 17 Oct low

* 21 Oct 11: 04:59 GMT (SGA) - EMGA FX INR FLOWS USD/INR 2-half year high; RBI Sharma warns of another global crisis

USD/INR continues to make fresh highs after clear break of psychological 50.00 threshold. USD/INR hit fresh 2-half year highs of 50.180, up from 49.800 close - with focus on more upside on concerns over global risk aversion, as France-Germany have not agreed on details for the EFSF and decisions are delayed till Wednesday. Concerns over slowing India growth, in the midst of higher inflation, as RBI is seen hiking 25bps to 8.50% on Oct 25, eve of Diwali holidays. USD/INR at highest since Aprl 29 2009. Eye test of 50.50 soon on back of more domestic, importers, oil firms, lcoal corporates, jewellers demand. Though not surprised to hear RBI offers now to cap the topside,on concerns that weaker INR may inflame inflation further up. Offers at 50.15-20, eye RBI, but focus still on topside. SGD/INR seen testing all time highs again, now 39.19-22 level, eye yest 39.30-35 level, with possible test of 39.50/40.00. Interesting talks of Asian Cbs, Indian accounts, sovereigns, amongst good buyers of GBP/USD on dips below 1.5750/1.5700 - good to watch for any reserves adjustment. 1-m INR firmer at 50.35/45 on the jump in the spot, with funds looking to buy more USD NDFs for upside risks. 6-m INR NDF at 51.23/38, eye test of 51.50. While SENSEX +0.33% or +55.65pts at 16,991 - but vulnerable to break of 16,000 again, and then the big 15,000 level.

More on RBI warning, Times of India on Oct 20: RBI Director VK Sharma has warned of another financial crisis brewing, as global liquidity becomes a concern amidst central banks pegging their lending rates at near zero levels, leaving scope for another asset bubble to take down the global financial system. "There is, thus, incontrovertible evidence that there is yet again a huge under-pricing of risks in the financial system and, therefore, it is not a question of if, but when, the generic asset bubble caused by manifold increases in balance sheets of central banks will burst," said RBI, executive director, One of the major worries this time around, which did not exist back then, is global liquidity.

On FX, USD/INR bids at 50.00-05, as importers, corporates chase for USD ahead of the Diwali holidays, and with RBI rate hike already factored in on Oct 25 to 8.50%. Fears of higher inflation vs slower growth, outflows hurting INR as well, USD/INR eye 50.50/51.00. WL

* 21 Oct 11: 04:33 GMT - EMGA FX CHART USD/INR Update: Bullish breakout of triangle.

The sharp gap-up on opening above strong barrier at 49.885confirmed a bullish breakout of 3-1/2 week symmetrical-triangle and using the widest part of this pattern as a measuring yardstick will give an upside projected objective at 50.400 and this should provide a bid undertone towards intraday trading.

R5: 50.67 8 Apr 2009 high

R4: 50.59 * 21 Apr 2009 high

R3: 50.40 objective of triangle

R2: 50.29 29 Apr 2009 high

R1: 50.18 intraday level

S1: 49.885 23 Sep high, break-point

S2: 49.57 3 Oct high

S3: 49.475 12 Oct high

S4: 49.365 * 20 Oct low

S5: 49.06 18 Oct low

* 20 Oct 11: 07:38 GMT (SGA) - EMGA INR FX FLOWS PM Adviser Rangaran : RBI could have raised rates faster; Hike b4 Diwali

Series of hawkish comments from PM Adviser, signalling RBI is on course to hike Repo Rate by another 25bps on Oct25 to 8.50%, on eve of Diwali - the Festival of light. USD/INR sharply firmer today on back of Indian importers, corporates, oil firms and gold importers demand, and on firmer USD across the board. USD/Asian under pressure as the eurozone crisis continue to simmer, given concerns that the EU Summit may not have "enough" measures to contain the crisis as hoped for. USD/INR hit 1-m highs of 49.785 - spiking up sharply vs yest close of 49.155 - as INR continue to be weighed by concerns over outflows and as importers continue to chase for USD ahead of Diwali holidays. USD/INR at its highest level since Sep 23 49.885 - focus now on break of psychological 50.00 level - though likely to hear RBI intervention to cap USD/INR - on concerns that a weaker INR will push up imported inflation further up, even as RBI looks to hike rates despite growth concerns, given the high inflation.

PM Chief Economic adviser Chakravarthy Rangarajan said RBI Could have raised rates at faster pace to have more effect. India needs to use fiscal and monetary measures to bring down inflation to comfortable 4-5% (food price index rose 10.50%). RBI's primary responsibility is to tame inflation. Fiscal deficit in FY12 will definitely be less than 5% of GDP, but may overshoot budget target of 4.6%.

Not surprised to hear state banks, RBI offers and exporters capping big 50.00. A break of 49.885 will see USD/INR at its highest level in 2-years 5-months since 50.02 May 14 2009. SGD/INR at all time highs above key 39.00 handle, as INR under pressure, with USD/SGD at 1.2715-20, as MAS had already eased policy - though less than expected - last Friday. USD/SGD eye break of 1.2600 again. Offers 1.2740-50. 1-m INR at 49.90/50.00, eye break of 50.00 for test of 51.00 soon as funds continue to sell the INR and buy USD NDFs. Concerns over further fall in India stocks, with SENSEX -1.88% or -319.87pts at 16,675.15 weighing on INR as well. USD/INR eye test of 52.00, SGD/INR eye test of 40.00. WL

* 20 Oct 11: 05:56 GMT - EMGA FX CHART USD/INR Update: Swift intraday upmove.

Intraday trade exposed swift and decisive move above 49.475/570 hurdles and now threatening the strong barrier at 49.885 and ability to clear the latter will trigger stronger upside potential to 50.020.

R5: 50.67 8 Apr 2009 high

R4: 50.59 * 21 Apr 2009 high

R3: 50.29 29 Apr 2009 high

R2: 50.02 * 14 May 2009 high

R1: 49.885 ** 23 Sep high

S1: 49.475 12 Oct high

S2: 49.35 18 Oct high

S3: 49.06 18 Oct low

S4: 48.68 17 Oct low

S5: 48.65 * 28 Sep low

* 20 Oct 11: 04:13 GMT - EMGA FX CHART USD/INR Update: Firmer start.

Firmer start with prices lifted above 49.350 resistance and supported by the positive stance seen on daily RSI-14/Stochastic and threatening 49.475 and break will further push prices to 49.570 with the stronger barrier behind at 49.885.

R5: 50.29 29 Apr 2009 high

R4: 50.02 * 14 May 2009 high

R3: 49.885 ** 23 Sep high

R2: 49.57 3 Oct high

R1: 49.475 * 12 Oct high

S1: 49.06 18 Oct low

S2: 48.68 17 Oct low

S3: 48.65 * 28 Sep low

S4: 48.33 21 Sep high

S5: 48.00 14 Sep low

* 19 Oct 11: 09:37 GMT (SGA) - EMGA INR FX FLOWS - USD/INR at lows; FinMin: growth will be weak; deficit target a challenge

Whippy moves in USD/INR characterized Wed's session as pair's jump to 49.24 reversed out on EUR bounce and 1.9% gains on SENSEX. Pair was cited hovering at day lows around 49.11-49.13 as we write. Separately FinMin Mukherjee rang a cautious tone on growth highlighting that economy could grow slower than earlier projections of near 9% and was hopeful that inflation will end FY12 at 7%. He also reiterated the need to address supply constraints to reduce inflation, adding that RBI need to follow central back action in other countries; expressed concerns that 4.6% deficit target for FY12 could prove challenging, which could partly be due to difficulty in meeting the government's disinvestment target of INR 400bn within the FY. In what would be deemed as a set of realistic comments, these remarks however are not surprising with near-unanimous expectations of deficit overshot this year along with sub-8.0% annual growth print. RR

* 19 Oct 11: 04:31 GMT (SGA) - EMGA INR FX FLOWS - Inflation to be underpressure till Dec; Govt to capitalise SBI; USD/INR

USD/INR gapped down at open, offered to 49.10 lows vs yest's close at 49.29 mark. Pullback however attracted importers', which saw pair reverse higher past 49.20 yet again, even as SENSEX registered more than 1.0% gains. Forays below 49.00 support are likely to be shallow on likelihood of negative news flow, esp from the Eurozone. Bond yields meanwhile witnessed a bid start to 8.81%, partly on risk-on mood and underpinned also by expectations of rate hike next week (for our views please search INR+preview). Separately Finministry's report highlighted inflation will remain under pressure until Dec, as non-food manufactured product inflation stays firm on 'cost pressures'. This marks yet another green signal for Indian policymakers to persevere with a hike on 25 Oct. Elsewhere Banking Secy Mittal assured that the govt would 'fully capitalise' the economy's leading lender SBI by end-March 2012 (BBG); this follows the downgrade in SBI ratings by Moody's earlier in the month on insufficient capital and risk of rising NPLs. RR

* 19 Oct 11: 04:16 GMT - EMGA FX CHART USD/INR Update: Consolidating within a potential descending-triangle.

Consolidation extending last 3 weeks and the failure to push towards 49.475 hurdle is settling prices lower and chart pattern is slowly unfolding a descending-triangle and need a downside break of 48.650 support to trigger bearish call.

R5: 50.02 * 14 May 2009 high

R4: 49.885 * 23 Sep high

R3: 49.57 3 Oct high

R2: 49.475 * 12 Oct high

R1: 49.35 18 Oct high

S1: 49.06 18 Oct low

S2: 48.68 17 Oct low

S3: 48.65 * 28 Sep low

S4: 48.33 21 Sep high

S5: 48.00 14 Sep low

* 18 Oct 11: 09:30 GMT (SGA) - EMGA INR FX FLOWS - USD/INR up; Moody's: growth cause for worry; Congress loses 4 bypolls

USD/INR was bid to fresh day highs at 49.29 as disappointing ZEW release and worries over France outlook downgrade weighed on EUR. SENSEX also held on to negative terrain, down 1.9% as we write. Some focus meanwhile on cautious comments by Moody's that compared to China "India presents a more serious cause for worry" as its economy "is slowing sharply", adding that the string of rate hikes could be considered a failure as inflation has remained resilient while demand slowed. Nonetheless we expect RBI to persevere with 25bps hike next week, though opposition is on the rise amongst business groups and domestic banks. Separately, the Mint reported that Congress failed to win any of the four by-elections for which results were announced on Mon - one Lok Sabha and three assembly by-polls - signaling erosion in the party's support base ahead of crucial assembly elections next year. Slew of graft allegations and slow pace of reforms could hurt the ruling govt's at upcoming elections and key centre polls in 2014. RR

* 18 Oct 11: 04:21 GMT - EMGA FX CHART USD/INR Update: Pullback fading.

Further pullback staged last session checked by the strongsupport at 48.650 and strong rebound from yesterday's low of 48.680 in the appearance of a long lower shadow is fading pullback with scope for current strength to shift towards 49.230 resistance and break will expose 49.475.

R5: 50.02 * 14 May 2009 high

R4: 49.885 * 23 Sep high

R3: 49.57 3 Oct high

R2: 49.475 * 12 Oct high

R1: 49.23 13 Oct high

S1: 48.965 17 Oct high

S2: 48.68 17 Oct low

S3: 48.65 * 28 Sep low

S4: 48.33 21 Sep high

S5: 48.00 14 Sep low

* 18 Oct 11: 03:58 GMT (SGA) - EMGA INR FX FLOWS - USD/INR back above 49.00; FII ceiling for bonds might be raised

As expected USD/INR sprinted back into 49 handle, with price action confined to 49.10-49.18 range in early trade. SENSEX opened down -1.2% weighed also by softer earnings of key tech players. Meanwhile after nearly 10bps fall in bond yields in late yest's trade, Tue saw rates flatline around 8.77%. Some respite in yields also likely from reports that the govt might consider raising the FII limit (currently at USD 10bn) into govt bonds, with any changes likely to be confirmed by the RBI in the coming sessions. Separately Chief Econ adviser Basu opined that current inflation was being driven partly by higher labour costs. Worries over potential wage-price spiral has seen the central bank undertake 200bps hikes so far this year and we expect another 25bps increase at next week's meet (for details please search INR+preview+CB). RR

Source : fxstreet.com