Dow has broken higher, out of the pause in January on the
back of tax cut expectations and dollar strength is gaining steam again. Reconciling
to the one China policy, mellowing down on the travel ban and by not making too
many headlines after meeting Abe, could suggest that Trump’s advisors are
taking charge now which could reignite the Trump trade. Today Yellen testifies
and I expect her to push the March rate hike chances higher although an actual
rate hike in March looks difficult to me. Overall I would position myself for further
dollar strength from here.
Today EM currencies have appreciated (KRW and CNH) while NDF
1m continues to trade left by 7p. Dow breaking higher should be positive for
Indian equities although continued dollar strength could still drive USDINR
higher in the medium term. EM currencies appreciation and USDINR NDF spread
seems to suggest that INR can appreciate today. CMP 66.94, Range 67.00-66.80.
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