Morning INR update

Recovery in oil prices had been the centre piece of the equity market turnaround since February 2016. Now the fact that oil prices have dipped 10%+ in the last one week should be a concern and might prevent the FED from being overtly hawkish tomorrow, brining US yields lower. Post the FOMC, this Saturday we have the G20 meeting of Finance Ministers and Central Bankers, which has been historically impactful on the markets. The discussion this time should be focussed on currency with the US pressing for a weaker dollar and China would ask for lower US yields to prevent capital outflows. Therefore although a rate hike tomorrow is given, the FED might turn less hawkish and we might see USD weakening for the next fortnight until after the G20 meeting.

INR and equities celebrated a big thumbs up to the incumbent central government during state elections. The government would want equities and INR to do well in response to its victory and therefore we might not see very aggressive intervention preventing INR appreciation for the time being. Given my view of a weaker USD and stronger equities, post the G20 meeting this Saturday, I would think that USDINR can head to 65.50 by March end, with 66.45 as top. 66.09 was the low in 2016 also and therefore should act as a support.  We are seeing nationalized banks in buying USDINR today morning. Oilers and regular importers would find these levels attractive creating some demand buy USDINR NDF is trading 9p left. CMP 66.24, Range 66.30-66.09.