RESEARCH VIA FOREX REPORT FOR 20 JUNE 2014

MARKET HEADLINES

Rupee at 59.85, rallies 54 paise against US dollar
The rupee regained strength to trade 54 paise higher at 59.85 against the dollar at the Interbank Foreign Exchange market today on increased selling of the US currency by exporters and banks. Forex dealers said a higher opening in the domestic equity market and dollar's weakness against other currencies overseas after the US Federal Reserve kept its easing policy unchanged also supported the rupee. The Fed on Wednesday said it would leave its benchmark interest rate unchanged but cut its monthly stimulus programme to USD 35 billion from USD 45 billion. The rupee lost 36 paise to end at an over seven-week low of 60.39 against the dollar yesterday as growing unrest in Iraq pushed up crude and caution prevailed in the currency markets ahead of the outcome of US Fed meeting.
Meanwhile, the benchmark BSE Sensex recovered by 125.27 points, or 0.50 per cent, to 25,371.52 in early trade today.

Dollar slips after US Federal more dovish than expected
The U.S. dollar wallowed at its lowest in nearly two weeks against a basket of major currencies on Thursday, in the wake of the Federal Reserve's cue that U.S. interest rates will stay low for a while. The New Zealand dollar soared to a record high against a basket of currencies after the Fed's dovish stance. New projections suggested the Fed saw rates rising more in 2015 and 2016 than it had previously forecast, but officials lowered their long-term rate target. The Fed also sounded comfortable with the inflation outlook despite recent signs of a pick-up in price pressure. Fed chief Janet Yellen said there had been "a slight decline of projections pertaining to longer-term growth" that prompted Fed officials to lower their view of the expected long-term federal funds rate from 4 per cent to 3.75 per cent. "We're seeing broad extension of the U.S. dollar weakness," said Sue Trinh, currency strategist at RBC Capital Markets. "Going forward, U.S. dollar weakness is likely to be sustained unless we get a sea change in the communique coming from the Fed, so upside risks look likely for euro, kiwi and Aussie," she added. The dollar index unwound all of the gains made in the lead-up to the Fed meeting. 

It slipped 0.3 per cent on the day to 80.378, and fell as far as 80.353, a level not seen since June 9. Against the yen, the greenback was nearly flat on the day at 101.91, down from a one-week high of 102.38 yen hit on Wednesday before the Fed's announcement, while the euro was slightly lower at $1.3589 after it touched $1.3600 on Wednesday. "In the end, it was just merely a battle of positioning as traders unwound positions in anticipation of a more hawkish Fed tone following the spike in CPI," said Stan Shamu, market strategist at IG in Melbourne. The Fed cut its monthly bond buying programme by a further $10 billion to $35 billion in a widely expected move and expressed confidence that the economic recovery remained on track.

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