Broker's Notes: Indian rupee gains; euro looks set for a challenge

Indian rupee

The Indian rupee climbed on Wednesday, a day after hitting a one-week low, supported by the euro's gains against the dollar and higher domestic shares. The rise, however, was tempered on market talk state oil refiners, the country's biggest crude importers, may be asked to to buy dollars in the coming week when a $3.5 billion IPO by Coal India opens to prevent a sharp appreciation in the rupee. Foreigners have been pouring money into Indian stocks and the Reserve Bank of India (RBI) Governor Duvvuri Subbarao said over the weekend in Washington that the central bank would intervene in the foreign exchange market if the inflows were "lumpy" and "volatile".

Gold

Gold gained half a percent on Wednesday, supported by the weakness in the dollar, after minutes of a Federal Reserve meeting showed monetary easing might be needed soon, while palladium rose to its highest level in a week. Bullion has been trading in a narrow range of less than $20 this week, and is seen to be consolidating after a record-breaking rally took gold to an all-time high of $1,364.6 last week. Bullish sentiment is intact. Physical demand remains strong, and scrap selling is scarce, as market players bet on a further rally in prices. The platinum-palladium ratio, or the number of ounces of palladium used to buy an ounce of platinum, fell to 2.87, its lowest in more than seven years. 

Euro

The euro looked set for a challenge of $1.40, with eyes on its eight-month high at $1.4030, after Federal Reserve minutes the day before reinforced expectations of more quantitative easing. But markets were cautious that uptrend’s against the dollar, which revisited a record low against the Swiss franc, were becoming stretched and the time for consolidation could be near. Hawkish comments from European Central Bank Governing Council member Axel Weber on Tuesday, which highlighted the difference in direction between Fed and ECB policy, gave the euro added lift, with talk of a big stop-loss buy order just below $1.40. But traders cautioned that euro zone policymakers were likely to be increasingly unhappy if the euro rose above $1.40.

Oil

Oil rose past $82 on Wednesday after China's crude imports jumped last month, while a weaker dollar and expectations of economic stimulus by top consumer the United States burnished the appeal of commodities for investors. China's September crude oil imports rose 35 percent from a year earlier to a record 5.67 million barrels per day, customs data showed on Wednesday, indicating demand from the world's second-largest consumer is surging. Oil ministers arriving in Vienna for OPEC's meeting on Thursday, the first in seven months, signalled the producer group would keep output targets steady. Saudi Arabia's Ali al-Naimi on Monday said the oil market was "well balanced.

 Source: Richcomm Global Services, DMCC, Dubai