Trump reportedly called Flynn (national security advisor and
an ex military lieutenant) to ask him if a strong dollar is better for the US
or a weaker one, and was told that Trump should rather direct this question to
an economist. But then reports suggest that the Trump administration will
finally announce tax reforms in the next few weeks, which partially reinstated
the Trump trade and brought dollar strength back. Point being that if the US
President is not sure then there is no way we can be and markets will continue
to move on tweets. Noise apart, looking at 5 year USD IRS which has moved from
1.1 in Sep17 to 1.95%% now, I would think that a substantial correction of
38.2% or 50% is on the cards (momentum has faded), as markets correct due to the
uncertainty about first, what US wants, and second what it can manage to get.
KRW and CNH have both depreciated along with the moderate
dollar strength overnight. Equity markets are mildly in the green due to the chatter about
US fiscal stimulus. USDINR on shore and offshore price action indicates aggressive
USDINR selling in the NDF market which is leading the price lower in spite of
EM currency depreciation and Indian bond yields moving higher. The lower trend
would stay till the time the offshore flow continues and 1m NDF-onshore spread
narrowing will be the indicator to suggest that the flow has ended, currently
at 6p. We have seen Nats in buying and foreign banks in selling since morning.
CMP 66.90, Range 67.00-66.75.
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