G20 communiqué failed to put the phrase that countries will
refrain from trade protectionism, indicating that the meeting ended without
agreements. Consequently equity markets in Asia are flat to mildly negative
today while USD continues to weaken moderately. In the last down move USD index
was not able to give a weekly close below 99.5 and I would again look at those
levels as the first target this week (USD index currently at 100.16). This is a
data light week and 9 FED speakers are likely to give directions to the market
(including Yellen on Thursday). I would think that the FED would now paint a
mildly dovish picture as that would help confidence and risk assets to rise,
given that they have 3 months before the next decision.
USDINR 1m NDF is trading 15p left as yearend (31st
March) crossing prevents the onshore and offshore market to converge. EM currencies
have appreciated (specially KRW) although CNH continues to hold near 6.89.
Equity markets are lacklustre today. INR has grabbed eyeballs by moving as much
as it did last week and seems to have become a global favourite to make good of
the carry and dollar weakness. Stepping into the Financial year end we might see
inflows on account of FDI and ECBs into the country. RBI seemed uncomfortable
to allow INR appreciation below 65.40. Given the negative equity markets we
might see 65.55 which might be good levels to create shorts for an overnight
down move. I would continue to expect 64.80 levels by March end with a stop
above 65.77 (daily close). CMP 65.46, Range 65.57-65.37.
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