In an environment where equity markets don’t fall for
anything, Dow closed more than 1% lower yesterday which is a big deal
considering that this is Dow’s biggest fall since Sep 2016. The rationale seems
to be that markets are worried about Trump’s ability to get support to pass the
tax cuts as the president seems to be facing severe headwinds in repealing
Obama care. Thursday we have the voting on the healthcare bill which could be
critical for risk sentiments. USD is clearly the DM risk currency now and a
weekly close below 99.5 could be an early sign of a medium term downward trend.
USDINR 1m NDF continues to trade 13p left. EM currencies
have depreciated since yesterday because of equity sell off and in spite of the
dollar weakness against G7. CNH although has strengthened. INR did not
strengthen as much in the last couple of days because of RBI intervention and
therefore I would expect Nationalized banks to sell the pair around 65.60
levels now. I would think that exporters and March end borrowers will take this
uptick as an opportunity to sell USDINR. A daily close above 65.75 opens the
door for 66.15 but that looks unlikely. Markets will watch the last week high
of 65.65. CMP 65.54, Range 65.60-65.40.
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