Dow Jones and Oil markets are showing signs of being wary of
accelerated rate hike expectations from the FED. To reiterate, in the recent
past whenever risk has come under threat, because of faster rate hikes from the
FED, the FED has comforted risk assets. Therefore although a rate hike today is
a foregone conclusion, a dovish hike is what I would expect, post which US
yields should come lower and dollar could weaken. On the other hand a hawkish
hike could lead to weaker risk sentiments with oil and Yuan falling further.
66.10 was being watched as a support and a break of that led
to stop loss sells taking USDINR below 65.80. March end generally has a lot of
inflows lined up in the form of FX loan disbursements and last minute FDI
closures, which could now be accelerated as people change their long held view
of gradual INR depreciation. Yesterday I was expecting 65.50 on USDINR by March
end and now I would think that we can head even lower towards 65.25. This is
basis my view of a dovish hike by the FOMC today and USD weakness post the G20
this Saturday. Talking to large exporters it seems that there is panic and we
might see more selling. For the medium term, I would still think that USDINR
would close above 67.50 on 30th June 2017. This is basis the RBI
balance sheet and FX MTM argument. For the day, CMP 65.68, Range 65.55-65.75.
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