Market Update - Thursday, 27th November 2014
Sampath Bank Dealing Room
What is on offer for LKR???
LKR remained highly vulnerable to developments in both economic and political environments in the last
week. Hence the currency could neither recover, nor stand on the ground that it was. Demand for the
currency surged amidst of very less supply of USD. Importers looked as if they are panicked with the
current developments. We saw importers trying to pay off their import bills prematurely creating more
pressure on the currency.
Market traded with thin volumes and was mainly quotes driven rather than volume driven. Market
players are trying to hold long on USD with the overall positions. In the process selling has dried up
considerably. Exporters have gone to a
T-Bills rates
Today %
Previous
watchful mode since the USD is giving
week %
them good gains for the moment.
3 months
6 months
12 months
AWPLR
Not offered
5.84
6.00
Not offered
Not offered
6.00
Next week is the week that we expect
foreign remittances to play a part. In the
6.53%
context of the game so far, we could
expect some stability or may be a bit of a gain on LKR in the next two weeks. If the remittance flow
becomes substantial it could draw some exporters also to the market with their conversions to generate
LKR, specially for the yearend bonuses and salaries. So we are approaching a week to look for. Still we
hold long on USD. INR too gained over the week against USD, from 62 to 61.75.
The developing political scenario has spread a lot of uncertainties over most sectors in the country.
There is no reason why the situation should get stabilized in the time to come as we are approaching
towards the elections.
Share market could attract a lot of attention as the market reacted big time, especially to the political
instability. Over all, the market dropped
FWD Premium
Today
Previous
heavily by about 200 points over the last
Week
week. The good thing is that we did not
1 week
12-15
12-15
see a lot of foreign participation in this
1 month
57-65
55-65
falling share market.
3 months
150-165
165-180
6 months
280-300
290-305
Market liquidity on LKR recorded low at
12 months
510-540
520-550
11 bio by yesterday’s closing. Money
market dealt at 6.00% on O/N basis and repo dealt at 5.50% on O/N basis. 6 months and 12 months TBill is still static dealing at 5.84% and 6.00% respectively.
The material contained has been obtained from Bloomberg & Reuters, sources believed to be reliable but may not be necessarily complete and
its correctness cannot be confirmed or guaranteed. Any opinion is subject to change without notice. Neither any information nor any opinion
expressed constitutes a representation by us, or a solicitation to purchase or sale of any financial instrument. Sampath Bank Plc, Colombo does
not assume any responsibility, whatsoever in this regard. For any queries please contact us on 94-11-2300146
LKR premiums remain stable and we do not expect much to happen with premiums in the time to come.
For the fresh week, we still would hold USD long with the expectation of some consolidation in
USD/LKR towards the end of the week. We would rather say that we are willing react to the situation
as and when it arises since the situation is highly unpredictable. We would like to include the following
chart once again, that we included last week on “USD/LKR by the year end for the last two years” just for
an additional thought. How the chart would be drawn for this year is a question mark…
USD doing good…
The dollar edged down against the yen and euro in early trade on Wednesday after uninspired U.S.
economic data pushed Treasury yields lower and dulled investor appetite for the greenback. The dollar
was down 0.1 percent at 117.63 yen, continuing its slow retreat from a seven-year high of 118.98 struck
a week ago. The euro stood little changed
FX markets
Today(SPOT)
Year Ago
at $1.2504, having gained close to one
USD/LKR
131.20
131.27
percent so far this week.
EUR/USD
GBP/USD
USD/JPY
1.2505
1.5790
118.70
1.3579
1.6287
117.39
US stocks trade directionless after the
barrage of data showed rising jobless
claims, coupled with a contraction in capital goods orders and falling home sales in the US, but global
The material contained has been obtained from Bloomberg & Reuters, sources believed to be reliable but may not be necessarily complete and
its correctness cannot be confirmed or guaranteed. Any opinion is subject to change without notice. Neither any information nor any opinion
expressed constitutes a representation by us, or a solicitation to purchase or sale of any financial instrument. Sampath Bank Plc, Colombo does
not assume any responsibility, whatsoever in this regard. For any queries please contact us on 94-11-2300146
equity markets edged higher on hopes for more stimuli from the European Central Bank and the
prospect that stocks may be a better investment than other alternatives
The activity in the US index futures points to a flat opening on the Wall Street yesterday after the initial
jobless claims raised more than expected while Durable goods orders ex-transportation contracted.
There would not be any economic data to be released today since it is a bank holiday in U.S
EUR has calmed down…
EUR behaved according to what we predicted last week. The single currency which was dealing at
1.2500 at the beginning of the week fell to our immediate target 1.2380 before going back to 1.2500.
Hence the consolidation that we spoke was evitable. Still the currency could not take out 1.2550 which
is a quite strong resistance before the very strong level of 1.2600.
Previous week
Last week
Still we believe that the consolidation phase is in operation with a little bias towards the down side. But
with the expected recovery on GBP, EUR also might look to gain in the larger picture. So the good news
on GBP could be supportive for the consolidation.
Going to the fresh week, we believe that the EUR would be more data driven than sentiment. As long as
1.2600 holds, the currency is said to be driven on the downward trend. 1.2380 remains the initial support
and is quite strong.
On the path to recovery... GBP Gains for Third day on U.K. GDP
data Bouncing back…
Sterling rose on Wednesday after data confirmed the British economy was growing at a healthy pace
while reports from the United States suggested growth there might be moderating. Cable rose to a twoweek high of 1.5807 after earlier dipping to a session low after data showed a surprise drop in British
business investment in the third quarter. Business investment declined by 0.7% between July and
September compared with the previous three months, its first fall since the second quarter of 2013,
while the British economy grew by 0.7% on the quarter, as expected.
The material contained has been obtained from Bloomberg & Reuters, sources believed to be reliable but may not be necessarily complete and
its correctness cannot be confirmed or guaranteed. Any opinion is subject to change without notice. Neither any information nor any opinion
expressed constitutes a representation by us, or a solicitation to purchase or sale of any financial instrument. Sampath Bank Plc, Colombo does
not assume any responsibility, whatsoever in this regard. For any queries please contact us on 94-11-2300146
The pound has held up against the dollar in the past week but is still almost 9 percent from a 2014 peak
near 1.7200, hit in July. We believe the clear breach of the key resistant of 1.5740 last evening, is likely
the start of a recovery phase with a target of 1.6020. Our strategy today is to buy on dips, keeping an
eye on the now strong resistance level of 1.5737.
Key levels to watch: 1.5807, 1.5835 and 1.5864 on the top side. 1.5767, 1.5735 and 1.5679
AUD trying to consolidates…
The shift to a bearish AUD view yesterday was timely and the immediate target at 0.8490 was quickly
met with an overnight low of 0.8480. As indicated in yesterday’s update, this level is a strong support
and it may need a couple more attempts before a clear break can be expected. Overall, the outlook is
still bearish as long as the trailing-stop at 0.8650 (from 0.8700) is intact. The next major support below
0.8480 is at 0.8400.
Elections in Japan too!!!
As highlighted in our report last week the Japanese Yen failed to break the 119.07 level highlighted in
our report last week with it briefly touching the 119.00 level.
The Japanese Yen came down from the High of 119.02 to 117.40 on the Japanese Session on Thursday.
However most analysts believe that this will not lead to an liquidation of JPY shorts but simply suspects
this will be a minor position adjustment before the thanks giving day and the short term investors are
recovering room to sell the Japanese Currency again after this position reduction and feel that the
Japanese Yen will achieve the 120.0 level before the Japanese General election scheduled on the 14th of
December.
A clean break of 117.40 though, may set the stage for an acceleration of losses until 117.00 is reached Nov 18 double top - ahead of 116.80 and 116.50. On the upside, 117.70/80 should cap bounces, with
only a recovery of 118.000 exposing 118.50 over the next week
Compiled by
Sampath Bank Dealing Room
Dir: 0112-300146
Fax: 0112-300144
Kawshana : 0114-730337, Nalin : 0114-730339, Amanda : 0114-730702, Manjula : 0114730338, ,
www.sampath.lk
The material contained has been obtained from Bloomberg & Reuters, sources believed to be reliable but may not be necessarily complete and
its correctness cannot be confirmed or guaranteed. Any opinion is subject to change without notice. Neither any information nor any opinion
expressed constitutes a representation by us, or a solicitation to purchase or sale of any financial instrument. Sampath Bank Plc, Colombo does
not assume any responsibility, whatsoever in this regard. For any queries please contact us on 94-11-2300146