The document provides an outlook and analysis of various currencies for the month of March 2017. It predicts that the Indian Rupee will appreciate due to strong economic fundamentals and foreign fund inflows. The US Dollar is expected to strengthen on expectations of a Federal Reserve interest rate hike. The Euro is forecasted to weaken ahead of key Dutch elections and on a stronger dollar. The Sterling Pound is anticipated to decline as Brexit negotiations begin, but robust economic data may cushion the downside. The Japanese Yen is expected to rise due to safe haven demand and low inflation.

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Currency Monthly
7th March 2017

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Currency Monthly7th March 2017
Outlook
Indian Rupee: Indian Rupee is estimated to appreciate for the month of March on account of strong economic
fundamentals despite demonetization which clearly shows that India is well equipped to face the uncertain global
road ahead. Further, the return of foreign funds inflows will lead to upside movement pressure in the currency. On
the domestic front, industrial production, WPI and CPI all expected to come on a favorable side which will keep the
currency in a positive territory.
Moreover, an upside in the currency will be witnessed due to estimates of the launching of GST tax from 1st Jul’17.
However, sharp upside in the currency will be capped if any decision or statement by the central bank will take
place in respect to cut its interest rates. For the month of March, Indian Rupee is expected in the range of 65.90-
67.70.
Dollar Index: The US Dollar Index is expected to be on a positive side in an upcoming month on estimates of hike
in interest rates by the Federal Reserve in its meeting on March 2017. Further, optimistic moves and
announcement by the new elected US President Donald Trump will lead to upside in the currency.
Moreover, robust manufacturing and non-manufacturing data have pushed retail sales up along with upside in the
economic growth of the country which has led to a positive movement in the currency. For the next month, Dollar
Index will be in the range of 99.30-105.
Euro: The Euro is forecasted to be under pressure in the coming month due to cautious stance maintained by the
traders and investors ahead of the key elections in Netherlands. Further, a stronger dollar will keep pressure on the
currency. Additionally, opinion polls have long predicted that the anti-Islam, anti-EU Geert Wilders’ populist Party
for Freedom (PVV) could emerge as the country’s largest party which will led to a negative movement in the
currency.
Moreover, if any extra stimulus measures or announcement of the same by the European Central Bank (ECB) will
keep the currency in negative territory. For the month of March, Euro is expected in the range of 1.030 to 1.090.
Sterling Pound: The Sterling Pound is anticipated to be on a negative note in next month as first phase of the
Brexit saga will come to an end in coming days, with the UK Parliament set to give final approval to the Article 50
legislation that will trigger formal Brexit negotiations with the EU. This could cause huge outflows of funds from the
UK markets. Furthermore, increased possibility of a Mar’17 US rate hike, spurred by hawkish comments from the
US Fed Chair and other policymakers will add to the woes.
However, the sharp downside in the currency will be cushioned as a result of manufacturing, service and
construction PMI data because all have surged by more than the expectations. In the coming month, the Cable is
estimated in the range of 1.180 to 1.280.
Japanese Yen: The Japanese Yen is expected to be on positive side for the month of March due to rise in risk
aversion in global market sentiments which will lead to an increase in demand for the low yielding currency. While
on the other hand, inflation rate, which is currently at -0.4 percent, still lingers below the 2 percent targeted levels.
The reason behind the same could be attributed to anemic demand from global and domestic to some extent will
keep the pressure on the currency. For the month of March, Japanese Yen is expected in the range of 110 to 117.

3. News and Developments
India’s GDP grew at 7.0% in Q3FY17
Indian GDP (at 2011-12 prices) expanded by 7.0% in
Q3FY17, higher than market expectation of 6.4%.
Though the economic activities slowed down
compared to previous quarter growth at 7.4%,
Q3FY17 GDP number surprised the policymakers and
is showing the minimal impact of note ban.
Furthermore, CSO has also revised the FY16 GDP
growth at 7.9% from 7.6% estimated earlier.
Gross value added (GVA), which is adjusted for
subsidies and taxes to arrive at GDP, grew by 6.6% in
Q3FY17 (6.7% in Q2FY17) despite the unfavorable
business environment during the quarter owing to
the demonetization.
The private final consumption expenditure (PFCE),
which contributes around 55% of the GDP, rose by
10.1% in Q3FY17 from 5.1% in Q2FY17 driven by
higher spending on the back of improved sentiment
following the implementation of the seventh pay
commission, higher crop production and increasing
disposal income.
Government final consumption expenditure (GFCE),
expanded by 19.9% (3.7% in Q3FY16 and 15.2% in
Q2FY17 due to the higher outlay for the salary and
pension hike due to the implementation of 7th pay
commission.
Investment scenario during Q3FY17 revived after the
three consecutive quarter of contraction as the gross
fixed capital formation (GFCF), which is used as an
indication of investment demand in the economy
grew by 3.5% in Q3FY17 v/s (-)5.3% in Q2FY17 and
3.2% in Q3FY16.
Improvement in capital goods sector was attributed
to the government spending, while the investment
activity in the private sector continued to remain
sluggish.
BoE also maintains status quo in its
meeting held in Feb’17
The Bank of England’s Monetary Policy Committee
voted unanimously to maintain Bank Rate at 0.25
percent. It left its plans for government and
corporate bond purchases which amounted to
£435 billion unchanged. The BoE governor Mark
Carney, in his speech, appeared in no rush to raise
interest rates, warning of "twists and turns" on the
road out of the European Union.
The Monetary Policy Committee have increased
Britain’s economic growth forecast in 2017 to 2
percent and expects growth of 1.6 percent in 2018
and 1.7 percent in 2019. The upgrade in the
forecast was mainly due to the fiscal stimulus
announced in the Chancellor’s Autumn Statement
along with strong global activities and equity
prices and more supportive credit conditions,
particularly for households.
The House of Commons has finally approved the
first stage of Article 50 bill which will empower
Prime Minister Theresa May to start pulling Britain
out of the European Union. The bill is yet to be
approved by the House of Lords and Parliament.
However, the investors have given a cold shoulder
to this development since they feel that approval
in one house doesn’t give an absolute assurance
that there won’t be a change of heart from other
MPs later.
US Fed keep the rates unchanged, hints
towards hike in future meetings
The US Federal Reserve, in its first meeting since
President Donald Trump took office, remained
positive on the economy and unanimously kept
the benchmark interest rates unchanged in a
range of 0.50-0.75 percent.
However, they failed to provide any hint on their
future course of actions with respect to interest
rates.
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Currency Monthly7th March 2017

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The above chart shows that Indian Rupee
appreciated in the month of February by more
than 1.7 percent and currency had appreciated in
January and December last year after
depreciating sharply in November 2016.
The currency appreciated and touched a high of
66.6475 after Reserve Bank of India (RBI)
surprised the markets and kept key rates
unchanged. Further, optimistic economic data
from the country led to upside movement in the
currency. The central bank in its sixth Bi-Monthly
Monetary Policy review kept its benchmark repo
rate unchanged at 6.25 percent. Other important
rates were also kept at the same levels like the
Reverse Repo Rate at 5.75 percent and both
marginal standing facility and bank rate stood
unadjusted at 6.75 percent.
Additionally, selling of dollars by exporters at
higher levels, a decline in CPI and WPI inflation of
the economy along with rise in the industrial
activity led to a positive movement in the
currency. Further, inflow of foreign funds in India
since February which led to sharp appreciation in
the Indian Rupee. The currency touched a low of
67.6825 and high of 66.6475 in the month of
February.
The committee referred to gradual adjustments in
monetary policy, with the economy expanding at a
moderate pace. Job gains remained solid and the
unemployment rate has stayed near its recent low.
They continue to see inflation rising to 2 percent
over the medium term.
The only eye-opening statement was on the near-
term risks to the economic outlook which the
committee expects to be roughly balanced
considering the recent Trump polices that has
shocked countries abroad.
RBI kept key rates unchanged in its sixth
Bi-Monthly Monetary Policy
The Reserve Bank of India in its sixth Bi-Monthly
Monetary Policy review kept its benchmark repo
rate unchanged at 6.25 percent. Other important
rates were also kept at the same levels; Reverse
Repo Rate at 5.75 percent, marginal standing
facility and bank rate at 6.75 percent.
The RBI governor expects the inflation rate to
linger in the range of 4 to 4.5 percent in the first
half of the financial year and thereon to move
towards 5 percent with risks evenly balanced
around this projected path.
According to the RBI governor, there is uncertainty
surrounding the direction of US macro-economic
policies with potential global spill over. He expects
improvement in emerging market economy’s
growth rate owing to easing recessionary
pressures in Russia/Brazil and stabilized Chinese
policy stimulus.
Global inflation rate is expected to surge higher on
the back of rising energy prices and demand.
However, global trade remains subdued due to an
increasing tendency towards protectionist policies
and heightened political tensions.
Crude and base metal prices have also firmed up
owing to OPEC’s agreement to curtail production,
an expectation of fiscal stimulus in the US, strong
infrastructure spending in China and supply
reductions.
67.45
66.65
67.97
67.18
66.37
66.44
67.95
68.75
67.36
68.24
67.41
66.71
66.3
66.8
67.3
67.8
68.3
68.8
Indian Rupee (USD/INR)

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Currency Monthly7th March 2017
The above chart shows that Euro remained under
pressure for the month of February after gaining in
January and dropped by more than 0.5 percent in
the month of December. The currency depreciated
on account of strength in the dollar index.
The ECB policymaker kept the key interest rate and
monthly asset purchase program unchanged and
expects it to run until ECB achieves its 2 percent
inflation target. To German FM’s comment on ECB’s
easy money harming savers, Draghi comforted the
media by saying that all member nations need to be
patient as the bloc was slowly regaining its
economic health.
Not only this, the World Bank reduced the growth
forecast for Euro area to 1.5 percent from the
previous forecast of 1.6 percent. Despite the
fractional reduction in growth, economic indicators
of the Euro area points towards a gradual recovery
of the economy after enduring years of stagnant
growth in the wake of the 2008 financial crisis and
the subsequent Greek debt crisis.
The currency touched a high of 1.0829 and low of
1.0494 in the month of February. However, the
sharp downside in the currency was prevented due
to optimistic manufacturing, economic sentiments
and business climate data from the region.
The US Dollar Index surged by more than 1.5
percent in February as shown in the above chart.
The currency rose to a high of 101.76 and low of
99.23 in the last month. The currency rose due to
estimates of hike in interest rates by the Federal
Reserve in Mar’17 meeting. Further, expectations
of more reforms to be taken by the newly elected
US President led to upside movement in the DX.
After taking oath as the new US President, Donald
trump signed an order banning people from seven
predominantly Muslim countries and Syrian
refugees from entering the US.
However, he has given leeway to the Christian
refugees’ which has resulted into strong protest at
the US airports. He also felt that strength in the
American currency was hurting America’s trades
which capped gains in the US Dollar.
Additionally, host of economic data sets from the
country, led to positive movement in the currency.
Right from the labor market sector; like ADP, NFP
and unemployment rate came on a good note.
Also, GDP and consumer confidence data along
with manufacturing, retails sales and housing data
showed signs that consumers are confident about
the economy and leading to more spending.
Moreover, the surge in consumer sentiment kept
currency in the positive territory.
95.46
93.61
97.20
97.40
101.21
100.09
103.02
99.51
102.20
93.5
95.5
97.5
99.5
101.5
103.5
105.5
US Dollar Index (DX)
1.115
1.140
1.103 1.100
1.135
1.115
1.088
1.114
1.077
1.038
1.052
1.078
1.051
1.03
1.05
1.07
1.09
1.11
1.13
Euro

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Currency Monthly7th March 2017
The Japanese Yen appreciated around 1 percent in
February after gaining by more than 3 percent in
Jan’17 and declining around 2.2 percent in the
month of Dec’16 respectively.
The currency depreciated on account of rise in risk
aversion in global market sentiments which led to
an increase in demand for the low yielding
currency.
On the domestic front, in Jan’17 BOJ Monetary
Policy kept the key interest rates unchanged and
intervened to buy 10-year JGB Bank of Japan to
keep yields below 0.11 percent. BOJ Governor
Kuroda on behalf of BOJ commented on Japan’s
inflation rate failing to hit its target levels of 2
percent.
He also mentioned that the US economy was the
largest one in the world and had a large influence
over other economies. Hence if Trump comes out
with some ruinous policies it will affect the entire
world. He, however, is positive that the new
policies will be good for Japan.
However, sharp upside in the currency was capped
due to negative manufacturing and non-
manufacturing data from the country.
The Sterling Pound came under pressure and
depreciated by more than 1 percent in the month
of February. The currency fell on account of a
stronger dollar.
Further, after comment from Britain’s PM on
sacrificing Europe’s single market access for
curbing immigration problem, Pound suffered
huge losses.
However, the sharp losses were capped after the
Supreme court passed a rule on UK lawmakers
getting the opportunity to vote on the final deal
for an exit from the trading bloc which gave some
easing to concerns over uncertainty ahead.
Moreover, the sharp downside in the currency
was prevented due to robust economic data from
the country.
Additionally, construction and services data
turned out to be on a favorable side which
cushioned sharp downside movement in the
currency.
In addition to that, unemployment scenario was
stable and claimant count change data declined in
Feb’17 which restricted further plunge in the
Sterling Pound.
1.442
1.488
1.293
1.344
1.212
1.273
1.228
1.253
1.232
1.18
1.23
1.28
1.33
1.38
1.43
1.48
Sterling Pound
109.54
106.53
106.89
100.31
103.92
103.3
117.91
112.07
99
101
103
105
107
109
111
113
115
117
Japanese Yen

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Currency Monthly7th March 2017
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Anish Vyas
Digitally signed by Anish Vyas
DN: cn=Anish Vyas, o=Choice Merchandise
Broking Pvt. Ltd, ou=Sr. Research Associate,
email=anish.vyas@choiceindia.com, c=IN
Date: 2017.03.07 13:34:04 +05'30'