Morning INR update: Decisive intervention!

US data continues to surprise on the higher side (pending home sales yesterday and consumer confidence the day before). The FED speakers yesterday talked a bit more hawkish than what we heard last week, indicating 2-3 more rate hikes this year. US dollar index bounced above 100 as a report quoted an ECB member saying that ECB will not shift its policy stance (from accommodative) in the June monetary policy. I would expect US dollar to weaken as market starts getting less confident on Trump’s ability to deliver on his fiscal spending plans going forward.  

NDF 1m is trading 8p left while EM currencies have mildly depreciated on the back of USD strength. Yesterday nationalized banks bought decisively at 64.90 levels and prevented INR from appreciating further, in spite of large inflows in the market. Towards the end of the day we saw other foreign banks also buying USDINR. Last couple of days in March should see more inflows as investors continue to build long positions in this financial year to avoid the taxes that kick in from 1^st Apr. Nationalized banks, basis their actions yesterday are unlikely to allow INR to appreciate today with other EM currencies under pressure. CMP 64.95, Range 65.00-64.85.