Dollar/Rupee opens over 6-week high on FII outflows after Mauritius tax treaty
Dollar/rupee opened at 67.00 compare to previous close 66.8825
levels on FII outflow
sentiment after the Indian government on Tuesday decided to impose capital
gains tax on investments coming from Mauritius starting next year, amending the
three-decade old treaty that brought in billions of dollars in investment but
was suspected of abetting tax evasion.
The tax will apply to investments made from Apr 1, 2017. It will
be imposed at 50% of the domestic rate, now 15-20%, depending on the instrument
and length of investment, until Mar 31, 2019, for companies already established
in Mauritius.
The full rate will apply for all companies after that.
The amendment of the treaty is a victory for Prime Minister
Narendra Modi's government, after previous administrations had also
unsuccessfully tried to change the terms of the treaty.
Signed in 1983, the treaty has been a cornerstone of Mauritius'
rise as a financial centre, and it has allowed the country to become the source
of the biggest foreign investments into India.
But the treaty's terms have been a growing irritant to India,
which has long suspected a chunk of the funds are not real foreign investments,
but come from rich Indians routing cash through the island to avoid Indian
taxes, a practice known as "round tripping".
Technically, USD-INR has turned neutral since 27 April 2016 and
squeezed in a cluster of support 66.55 and immediate resistance of 67.00, also
struggling to break this consolidation range.
With that in mind, USD-INR expect to continued its short term
consolidation unless it give either side break, and any rise towards
66.95-66.15 is appear to set short term selling activities.
Strong resistance is seen above 67.30 on closing basis and
USDINR would need to trade above these levels in order to test 67.55-67.80.
EUR-INR
Euro traded little changed Tuesday as dollar strengthened on
risk-aversion after weak Chinese economic data and short covering ahead of
crucial Euro zone economic data set for later this week. GDP figures and
consumer inflation figures from Germany, Italy, France and Spain are set for
Friday along with Euro zone GDP figures.
A high wave candle stick formation on EOD is indicating
indecisiveness in EURINR. Near term support is seen at 75.95 and correction is
expected to come below these levels only, else any rise towards 76.35-76.40 may
attract huge selling activities with stop loss above 76.65.
GBP-INR
Pound snapped five-day losses Tuesday on short covering amid
narrowing United Kingdom trade deficit. UK's
trade deficit in goods fell to GBP 11.2 billion in March from GBP 11.4 billion
a month ago. The economists had expected level of deficit was GBP 11.45
billion.
GBPINR continued to trade below its near term resistance 97.40
for fifth consecutive day, while retracing from every rise 97.05-97.10 levels.
It’s expected that GBPINR may remain under pressure unless it gives a closing
above 97.40.
Further, GBPINR would need to trade above these levels in
order to test 97.80-98.00.
JPY-INR
Yen traded at near two-low on Tuesday after Japanese Finance
Minister Taro Aso reiterated his concerns about the strengthening of the yen
and gave strong hints of intervention in the foreign exchange market to curtail
the rise of Japanese yen.
JPYINR continued its fall for second consecutive day, and
retraced more than 0.60% from its previous close of 61.73.00. Near term trend
is looking bearish following to a long bearish candle stick on EOD chart. Further, there is strong resistance of
61.95 and JPYINR would need to trade above this level in order to test
62.50-63.00
Major Economic Data & Events Schedule today
|
Time
|
Currency
|
Economic Indicators
|
Forecast
|
Previous
|
Possible Impact
|
|
10:30am
|
JPY
|
Leading Indicators
|
96.40%
|
96.80%
|
Negative
|
|
2:00pm
|
GBP
|
Manufacturing Production m/m
|
0.40%
|
-1.10%
|
Positive
|
|
GBP
|
Industrial Production m/m
|
0.70%
|
-0.30%
|
Positive
|
|
|
7:30pm
|
GBP
|
NIESR GDP Estimate
|
-
|
0.30%
|
-
|
|
11th-13th
|
USD
|
Mortgage Delinquencies
|
-
|
4.77%
|
-
|
|
10:31pm
|
USD
|
10-y Bond Auction
|
-
|
1.77|2.8
|
-
|
|
11:30pm
|
USD
|
Federal Budget Balance
|
116.2B
|
-108.0B
|
Positive
|
More will update soon!!
