Rupee likely to appreciate in near-term; USDINR futures may trade lower, support at 81.1 By Dilip Parmar The Indian rupee is expected to appreciate following overnight weakness in the dollar index after US inflation cooled in December. The implied opening from the forward suggests USDINR could trade at 81.25. On Thursday, spot USDINR fell 2 paise to 81.55, registering the fourth decline in a row following stronger Asian peers and dollar inflows through the FDI route. Technically, the pair has been trading in a bearish sequence of lower top lower tops and bottoms. It has support at 80.70 once the level of 81.10 breaks, while on the higher side, 81.70 and 81.90 become the resistance. Looking ahead, PMI gains in November and December point to improving sentiment that should help counter global headwinds. The dollar extended its decline after a report showed US inflation cooled in December, providing the Federal Reserve with room to slow the pace of interest-rate hikes. Asian shares were mostly higher in choppy trading on Friday, with a light tailwind from easing inflationary pressure in the US. Bank of England policy maker Catherine Mann said underlying inflationary forces in the UK look “pretty robust,” a signal she’s still pushing for big interest-rate increases despite the prospect of recession. USDJPY is accelerating on the downside as traders smell another BOJ policy change is coming. Bearish dollar momentum is taking on a self-fulfilling role, given fresh impetus with JGB 10-year yields above 0.5%. USDINR January future depreciated for the fourth day in a row. The pair closed well below medium-term moving averages. The pair broke the one-year upward slopping trendline support of 81.70 pave the way for further weakness. Momentum oscillator, Relative Strength Index placed below 50 and heading towards an oversold zone. MACD fell below the zero line with a negative cross over. The derivative data shows a short build-up as the price declined while open interest and volume gained. Looking at the above technical evidence, USDINR futures could trade lower. It has support at 81.10 and resistance at 81.70. (Dilip Parmar, Research Analyst, HDFC Securities. Views expressed are the author’s own.)
If the current trend continues for a longer period of time, not only oil mills but oilseeds growers will also not be able to get good rates of their produce, says Samir Shah, president of Gujarat State Edible Oils and Oil Seeds Association (GEOA). Shah who is also past president of SOMA says that due to various international factors rates of edible oils had gone up considerably, especially imported oils earlier this year.
“With a view to curb rising prices of edible oil, the Government of India reduced import duty on edible oils. Considering the fact that India is producing hardly 30 percent of its edible oil requirement, the decision was right at that point of time. Now when international prices of edible oils have gone down by 15 percent to 25 percent and high production period has started in edible oil exporting countries, the government should gradually increase import duty to protect local oil mills and oilseeds growers,” said Shah. GEOA has also made representation before Union Minister for Commerce & Consumer Affairs, Piyush Goyal to increase import duty.
In June import duty on edible oils was ranging from 35 to 55 percent, since then the government gradually reduced import duty and at present it is ranging from zero percent to 15 percent on different edible oils, he said.
Just a month back prices of edible oils were through the roof and the government took appropriate measures by reducing import duty in order to protect consumers, says Atul Chaturvedi, president of Solvent Extractors Association of India (SEA). “Prices of edible oils are coming down globally. Kharif sowing has already started across the country. In the interest of local farmers, it is high time to enhance import duty in a phased manner to encourage local edible oil value chain,” opined Chaturvedi.
On Thursday imported Palm oil prices were at around Rs 2100 per 15 kg as against local Rs 2700 and Rs 2550 of groundnut and cottonseed oils. Prices of other local oils including ricebran, coconut, soyabean and mustard remained as high as Rs 2350, Rs 2520, Rs 2500 and Rs 2580 respectively.
India imports around 13-13.5 million tonnes of edible oils, of which around 8-8.5 million tonnes (around 63 per cent) are palm oil. Though the price of other imported Sunflower oil remained at around Rs 2700 per 15 kg, but import quantity of the oil is much lower than that of palm oil.