Rupee Monthly Report February 2024

1. USDINR is expected to trade within the range of 82.65-83.75 for February 2024. Concerns over rising oil prices on geo-political tensions,
equity outflows, Yuan depreciation and strength in US dollar as March rate cut seen less likely with Fed keeping a cautious tone is
expected to keep Rupee on depreciation mode. However, with RBI protecting upper sides of USDINR may limit the upside. Immediate
support zone lies at 83.0 below which doors will be open for 82.90-82.65. While breach of crucial resistance of 83.25 will lead upside move
towards 83.50+ levels.
USDINR Monthly Report: February 2024
Key Triggers
 Indian Union Budget: Union Budget for the financial year 2024-25 is scheduled on February 1 and will present the final interim
budget of Mr. Narendra Modi government's second term. Since this Budget is being presented in the Lok Sabha elections year, it will
be an Interim Budget.
 FOMC Policy: Next meeting is on 31st January 2024 and it is anticipated that the Fed will keep interest rates unchanged . March rate
cut seen less likely.
 Brent oil prices: We can expect oil prices to move towards $100+ levels buoyed by positive US economic growth, signs of Chinese
stimulus boosted global demand expectations coupled with ongoing geopolitical tensions that could hit supplies.
 India’s Trade deficit: India's trade deficit is expected to widen to $23-24 in the coming months if there is any escalation in geo-
political tensions in the Middle East. This may lead oil prices towards $90/bl+ levels and then this will put pressure on trade balance
as well as CAD.
 FII flows: Higher oil prices and elevated US yields are keeping the FPIs on the defensive ahead of Budget, however stable economic
growth in India as compared to other emerging markets (EMs) will attract FPIs back to the Indian equities in coming days.
 FX Reserves: RBI will continue to sell at higher levels to prevent sharp upside against dollar buying by oil companies. We can once
again see reserves to reach $650+ bn (new record high) mark in coming few months as RBI buy’s dollars to protect exporters.

2. Most Asian Currencies Depreciated Vs Dollar In January
• Most of the EM currencies depreciated in January, with Japanese
yen depreciating the most by 4.8% followed by Thai Baht with
depreciation of 4.0% and then Malaysian Ringgit by 3.1%. While
Rupee being the only pair to appreciate against dollar.
• Rupee appreciated merely by 0.2% despite strengthening in US
dollar by 2.2% last month. Initially in January strong inflows from
corporates led Rupee to hit more than 4-month high of 82.7775.
• But all flows was absorbed by the RBI to increase their reserves and
geopolitical tensions in the Middle East led the pair to move higher
and settle at 83.0425. RBI played a vital role by intervening both
buying and selling dollars to support the Rupee from further
depreciation and build a competitive market for importers as well
as exporters.
Rupee Appreciation vs. US$
Rupee Depreciation vs. US$

3. India Extends Winning Streak For 10th Straight Month In Emerging Markets Tracker
Source: Mint

4. Indian Interim Budget 2024-25 Expectations
Union Budget for the financial year 2024-25 is
scheduled on February 1 and FM will present the
final budget of Mr. Narendra Modi government's
second term.
Since this Budget is being presented in the Lok
Sabha elections year, it will be an Interim
Budget. Being a vote of account, no significant
policy announcements are expected in this
interim budget.
Following are some points to be focus in upcoming budget:
• Government could increase the tax exemption limits for income tax new scheme to 7.00 lacs, standard deduction
to be increased.
• PLI scheme expansion for job intensive sectors.
• Modest growth expected in Government social spending amidst focus on welfare programmes, Kisan Nidhi for
women can be increased from Rs.6000 to Rs.12000.
• Fiscal deficit expected to be brought down to 4.5% from 5.9% in current financial year.
• There could be a deceleration in Capex growth from an increase of 33% to reach 10 lakh crore to a more modest
7-8%.
• A review of double taxation on dividends.
• Expectations for relief in LTCG tax to encourage more investor participation in the stock markets.
• Clarity on poverty index as Niti Aayog has shown poverty ration has declined from 25% to 15% in 2019-20.
• Measures to boost consumption demand by putting more money in the hands of people.
• Funds allocation for cleaner fuels, green hydrogen and ethanol based fuels.
• Funds to power sector for adoption of renewable energy.

5. Focus Will Be On Fed’s Comment On The Timeline And Quantum Of Rate Cuts
Fed kept the interest rate as expected unchanged at the
range of 5.25-5.50% at December FOMC meeting. It is
expected to maintain key interest rates at current levels at
the conclusion of its upcoming meeting on 31st January.
The committee will also likely continue to allow up to $95
billion in assets to roll off its roughly $7.7 trillion balance
sheet on a monthly basis in 2024.
By bringing inflation levels down near its 2% long-term target
while avoiding an economic recession, the Fed hopes to
navigate a “soft landing” for the US economy. Federal Reserve
is now facing a new challenge of determining when it should
pivot to rate cuts to support the US economy without risking a
potentially dangerous rebound in inflation in 2024.
As per CME Fed rate monitor tool there is 97% probability of
Fed would keep the interest rates unchanged while merely
2% for 25bps cut for January. While probability of 25 bps
rate cut came down to 44% for March.
US inflation rose more than expected by 3.4% y/y in
December Vs 3.1% in November and 3.2% estimated. US
Advanced GDP expanded by 3.3% y/y in Q4, more than
expectations of 2.0% but was down from the former pace of
4.9% in Q3.
US dollar index rose over 2% and hit a high of 103.82 while US
10-years bond also witnessed gains of around 16 bps to hover
at 4.03% in January after hitting a 5-months low of 3.78% in
December.
US CPI
US inflation rose
by 3.4% in Dec’23
US Interest Rate

6. Indian Crude Oil Basket Rose In January, As Brent Oil Jumped Above $80/bl
US CPI
US Interest Rate
• India, the world's third-largest oil importer, has seen its crude oil import
bill decrease from Oct-Dec with falling crude oil prices amid demand
concerns and over supply. However, it posted a small rise of 1.9% in
January.
• According to data from the Petroleum Planning and Analysis Cell
(PPAC), the cost of per barrel of imported crude has surged sharply by
almost 25% in September to $93.54/bl from the low of $74.93/bl in
June. But it dipped by 17.2% to stand at $77.42/bl in December.
Brent oil
• Brent oil prices touched a two months high of $84.04/bl in January
amid escalating conflict in the Middle East and it may head towards
more severe war after the Iran-backed Houthi group killed three US
service members in Jordan raising concern about further disruption in
oil supply. Meanwhile, the stronger US economic, drop in US crude oil
inventories and China cut their reserve requirements ratio to bolster
their economy will further aid oil prices.
• Initially in January, there was a price cut by Saudi Arabia, whereas a rise
in OPEC supply output and the largest oil-producing region in US
slowdown due to minus-degree temperature as well as demand
concerns from the major importer has subdued oil prices.
• OPEC members are due to meet on 1st February any further production
cut or any of the members leaving the OPEC allies like last time will
create more volatility in oil prices.
• Oil companies will keep on buying additional US$ requirements which
will support USDINR on any dips.
• Consistent trading above key resistance of 87.50 will open door for
95.40 and then 100.30 levels. On the downside, below 74.50 next
support is located at 71.60 and then at 65.10.

7. Particulars
Dec-23 Dec-22
Apr-Dec
FY2023-24
Apr-Dec
FY2022-23
(USD Billion)
Merchandise
Exports 38.45 38.08 317.12 336.3
Imports 58.25 61.22 505.15 548.64
-19.8 -23.14 -188.03 -212.34
Services
Exports 27.88 31.19 247.92 239.50
Imports 13.25 15.81 129.24 135.29
14.63 15.38 118.68 104.21
Overall Trade
(Merchandise
+Services)
Exports 66.33 69.28 565.04 575.79
Imports 71.5 77.03 634.39 683.93
Trade Balance -5.17 -7.76 -69.35 -108.13
India's Trade Deficit Narrowed For Second Straight Month
India Trade Deficit
• India's Trade deficit narrowed to $19.80B in December 2023 compared to $20.58B in November 2023, despite the ongoing conflict in
the Red Sea which could hamper the imports due to the rising freight cost, insurance premiums and transit times. Exports rose by 1%
at $38.5 bn without getting affected by Red Sea crisis and Imports fell by 4.7% at $58.3 bn
• The trade deficit dropped by 14.4% as compared to $23.14 bn in December 2022.
• Overall Trade deficit (Merchandise+ Services) in December 2023 narrowed to $5.17 bn against $7.76 bn in December 2022.
• In FY 2023-24, merchandise exports decreased by 5.7% y/y to $ 317.12 bn, while imports dipped by 7.9% y/y to $ 505.15 bn, leading
to a deficit of $188.03 bn down by 11.4% y/y Vs $212.34 bn in the same period last year.
• While services exports rose by 3.5% y/y to $247.92 bn in FY 2023-24 and imports were down by 4.5% to $129.24 bn on year for the same
period thus creating a surplus of $118.68 bn up 13.9% y/y Vs $104.21 bn in the same period last year.
• Overall Trade deficit (Merchandise+ Services) in Apr- Dec 2023-24 stood at $69.35 bn, while it was $108.13 bn during Apr-Dec2022-23.

8. FII Outflows In January, While FX Reserves Declined With RBI Protecting Upper Levels
• Domestic equity market witnessed a highest inflows in December
2023, but during the start of the January we saw offloading of FII
on the back of rising US treasury yields and diminishing
expectations of interest rate cuts by the Fed in the first half of the
year. However, FPIs were bullish on the debt market last month.
• FII’s sold around $0.791 bn in January. In the whole of 2023
total inflow stood at $28.703 bn.
• However, the factors that can trigger more outflows will be
geopolitical tensions in the Middle East, Fed's uncertainty over
timeline as well as quantum of rate cuts and any positive news
from China as they cut the reserve ratio to support economic
growth.
• India’s FX reserves dipped by $2.80 bn from prior week to
$616.14 bn for the week ended 19th January 2024. Reserves
witnessed a peak levels of $623.20 bn during the start of the
month of 2024, the last highest level was $642.453 in September
2021 as RBI actively bought dollars to build its reserves and give
equal opportunities to exporters as well.
• In January reserves declined by 4.30 bn as the central banks
was present on both the sides selling dollars at the upper level
avoiding further depreciation in Rupee and buying the dollar to
keep a competitive market for both importers and exporters.
• As per RBI data, since Feb to July 2023 the central bank bought
net $24.055 bn, but turned net seller since August month and
sold around $7.603 between August to November as per the FX
Reserves data. The current level of foreign reserves is enough for
around 11-12 months of imports.

9. Finrex Treasury Advisors LLP
9167013618 | Landline: 022-26820634 | research@finrex.in | www.finrex.in | Follow us: @finrextreasury |
USDINR- 82.90 Is Strong Support While 83.25 Is The Crucial Resistance
Important Levels
Key Support 82.90 82.65 82.50
Key Resistance 83.25 83.50 83.75
USDINR Spot