Weekly forex hedging guide for corporates

Please find attached herewith 'WEEKLY FOREX HEDGING GUIDE FOR CORPORATES' dt  17th June 2013.

Brief on USD/INR:  

Last week, it opened at 57.25, high / low at 58.98 / 57.1570, and closed at 57.4900 as against earlier week's closing at 57.05.

Last week, it was expected that in case Rupee further depreciates and surpasses the earlier high of 57.32, it may attempt to move towards 58.35. However, if it closes below 56.70 decisively, it should start strengthening. The Rupee crossed all time high of 57.32 on Monday itself and galloped to 58.98 by Tuesday noon itself, after which it started correcting and came down to 57.3950, and finally closed at 57.4900.

Last week, we had opined that having completed 5 weeks of depreciation, there is still risk of continuation of depreciation by another two weeks, as it normally takes 5-7 weeks to complete one intermediate trend. Now, six weeks have already been completed and we feel that the coming 7^th week should now be decisive and after all the volatility, the current intermediate trend of the currency should reverse. This is also confirmed from the fact that, after about 29 days, 3DMA (57.76) have gone below 5DMA (57.95), which can be said to be starting signal for reversal of intermediate trend. Other technical indicators have also started giving signals of reversal. Further Dollar Index has also weakened by around 5% along with strengthening of Euro / JPY / GBP against Dollar, which also point towards good days for Rupee in future.   We had last week mentioned about possibility of Rupee making a double top and to reverse thereafter. We stick to that view (though both the tops -57.32 and 58.98 - are slightly away from each other) and are of the view that in medium to long term, Rupee should strengthen much from recent high levels in months to come.

Presently, the Currency is moving above majority of its important moving averages: 13DMA (57.15) / 3WMA (57.03) / 5WMA (56.36) / 3MMA (55.91) / 3QMA (55.58) / 50DMA (55.21), however have now gone below 3DMA (57.76) / 5DMA (57.95). These should act as major supports / resistances respectively in future.

This week, we expect that Rupee strengthening may continue. The likely strong supports should be around 57.30 / 57.10, from where there is 50% possibility of a technical bounce. If it happens, the levels of 57.70 / 57.90 may be retested. However, alternatively, if 57.00 is broken on downside, the currency may move towards 56.40.

Importers are advised to hedge their short term payables around 57.10 – 57.20. Review for hedging medium term payables should be made, once we reach around 56.40 or so.

Exporters are advised to continue covering receivables around current levels. For reference purposes, the target rates for Sept end receivables should now be in between 57.75 to 58.75.

With best regards,

DS Kapoor
Cost Accountant

Mobile: 9335091116; 9628411116

E-mail: dskapoor @ sify.com

Encl: as above