Yesterday the Philadelphia FED business outlook survey “shocked”
on the upside coming in at the highest since Jan 1984, indicating that manufacturing
in the US which had been a weak link for the last 2 years, is picking up. In
spite of this dollar weakened and treasury yields came off which I cannot explain
through any other asset correlations. I would continue to expect USD strength given
the US data prints and the expected Trump Tax cuts. Today is light on data with
UK retail sales being the most important.
USDINR went up yesterday as shorts cut their position along
with buying by nationalized banks. EM currencies have depreciated mildly
overnight in spite of dollar weakness. Equity markets in the US continue to
look resilient and might give a strong weakly closing today. Indian equities
today are standing out today because of a surge in heavy weight banking stock
although Nifty continues to look bullish for another 2-3% gains at least. USDINR
might see bids in the first half today as the next 4 days are off for any
remittances. USDINR 1m NDF continues to trade 7.5p left. I would still expect
limited upside in USDINR and would look to sell the pair at 67.25 levels. CMP
67.11, Range 67.25-67.05.
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