Contributed by: Pranjal Modi, CFA
IAIP organised a speaker event on Forex market on January 23rd in Kolkata, wherein Vikram Murarka, Chief Currency Strategist, Kshitij Consultancy Services, explained the method of studying and forecasting the currency markets from a technical and fundamental point of view. The event was well received by the members.
Vikram emphasized on the need look into the domestic factors as well as the macro global factors which influence the currency movements. He drew upon his experience of 23 years in the forex industry since the devaluation day of 1 July 1991 to take us deep into the art of forecasting. He was very generous to take us through his in-house database of exchange rates, historical correlations between different factors like gold-crude, USD-INR and Sensex etc, trends in Indian BOP, USD-INR log charts and other studies which his team undertakes to forecast currencies.
Murarka discussed interest rate differential and inflation differential as a critical factor in the determination of exchange rates. However, he also mentioned the importance of other factors and how they keep a close track of all of them on a regular basis. These factors include global stock markets (US, Europe, Japan, SE Asia etc), Commodities (Bullion, Crude, Metals etc), Interest Rates (Sovereign 10Y yields and yield differentials across the globe), currencies (Majors, cross and Emerging Market currencies) and global Economic data releases (Unemployment, GDP, Central bank meetings etc.).
We had a long discussion on the impact of Domestic CAD in the determination of exchange rates in the short term and also about measures which the central bank is taking to control the falling rupee. Murarka was clear in mentioning that the RBI is much more concerned about stabilizing the rupee as against strengthening the rupee and that the days of 50 are long gone, 62 is the new normal.