The global theme currently is that of US and EM equity
market strength on the back of expected tax cuts by Trump (more details expected
on Feb 28th ). I would not classify the current theme as that of
dollar strength as US yields are in range, and as EM currencies appreciate while
on the other hand Euro remains under pressure due to French political risks.
Looking at CNH, JPY and MXN it seems that the respective countries who came
under Trump’s direct fire for manipulating their currency levels, perhaps do
not want to irk the most powerful office and therefore these currencies are
stable to appreciating currently. FOMC minutes might move rate hike
probabilities today affecting currency levels, I would expect March rate hike
chances to increase from the current 36% post the release resulting.
USDINR 1m NDF is trading 6p left (from 4p on Monday) while
KRW has appreciated 0.5% in the last 2 days. Equity markets in Asia are trading
strong on the back of gains in the Dow. Equity and Debt FPI inflows continue to
trickle into the country although in small amounts. We have recently seen
Nationalized banks buying aggressively around 66.90 levels although their bids don’t
seem to be there today. I would continue to be an overnight shorter of USDINR
and good levels to create such positions are 66.95 now. CMP 66.90, Range
66.97-66.75.
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