Morning INR update: FED speakers to move markets.

Evans did not step up rate hike expectations, which led the markets to bring UST yields lower and USD got mildly sold off. I would think that the FED for now would want to maintain a relatively benign outlook for 2017 rate hikes while maintaining a fine balance, so as to not become negative on economic outlook. This combination of positive economic outlook and not too hawkish on rate hikes helps confidence and thus equity markets. A break of 100 on the dollar index should result in the next 0.5-1% move in G7 which otherwise hardly moved yesterday. Today at 3-30pm IST Dudley (FOMC Dove) and Carney (BOE governor) speaks followed by George (FOMC Hawk) at 9-30pm. George’s statements would be keenly watched given that she has been advocating accelerated rate hikes.

Investments from Mauritius into India will start getting taxed at 50% for two years starting 1^st April 2017. This could lead to reduced volumes and increased volatility in Indian stock markets in the short term. One could expect profit taking before the calendar turns as equity markets now seem to have factored in all positives. This is not a new development but I would still anticipate some effect due to this over the next 10 days.

USDINR 1m NDF is trading 15p left without much effect on the onshore markets. EM currencies continue to trade strong with the exception of CNH. Equity markets continue to be lacklustre. Nationalized banks seem to be intervening on both sides making it difficult to form views. General market consensus seems to be that USDINR should hold near 65 levels as Rupee competiveness would be hurt at lower levels. CMP 65.43, Range 65.48 – 65.30.