DAILY FOREX REPORT FROM RESEARCH VIA 01/SEP/2014

MARKET HEADLINES

• Euro falls to near 21-month low vs Swiss franc
  The euro fell to its lowest in nearly 21 months against the Swiss franc on Thursday amid speculation that the European Central Bank will ease monetary policy in coming months, possibly by quantitative easing. The euro fell to 1.20595 francs on trading platform EBS, its lowest since early December 2012 and down 0.1 percent on the day. Before the latest speculation about the ECB, the Swiss franc had been rising due to safe-haven inflows amid renewed tensions between Russia and Ukraine. A sustained drop in the euro could test the Swiss National Bank's three-year old pledge to cap the franc at 1.20 per euro. "The likelihood of the ECB taking further measures is increasing, should long-term inflation expectations fall further," said Esther Reichelt, currency strategist at Commerzbank. "This is exerting downward pressure on euro/Swiss franc. So long as such speculation persists, it will be difficult for it to recover on a sustained basis."

• Rupee volatility falls to 3-week low, but may soon spike

Rupee's one-month implied volatility fell to 6.137, lowest since August 5. But traders expect a surge in September. Key risk events include the Supreme Court ruling on coal blocks (September 1) and US employment data (September 5), say traders. September also marks the end of quarter, which typically leads to volatility as firms square books.

• Rupee recovers 7 paise against the US dollar
   The rupee recovered by 7 paise to trade at 60.38 against the US dollar in early trade today on selling of the American currency by banks and exporters amid sustained foreign capital inflows. Besides, a higher opening in the domestic equity market and strengthening of the euro against the dollar overseas also supported the local currency, forex dealers said. Yesterday, the rupee had lost two paise to close at 60.45, nearing its four-week high levels, against the American currency on dollar demand from importers. Meanwhile, the benchmark BSE Sensex rose 82.66 points, or 0.31 per cent, to trade at new life-time high of 26,642.81 in opening trade today. 
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