Tuesday, March 7, 2017

Morning INR update

Strong US factory orders has pushed March rate hike chances near 100%. Market now seems to be factoring in 3 rate hikes this year which seems the best case scenario to me and therefore immediately I would want to bet on some amount of correction to this view, through USDJPY.

Geert Wilders a far right candidate in Netherlands, who is likely to pitch to take the country out of EU and restrict immigration, seems now likely (according to polls), to win the 15th March 2017 elections. If he becomes Prime Minister then we should see a significant risk off arising in the EU but somehow the market seems to be ignoring this possibility for now as very little is being talked about the Dutch elections. This would make a short EURO trade worthwhile and if one doesn’t want to be exposed to the US interest rate hike related volatility, then a short EURJPY trade could be more specific to the theme.

USDINR 1m NDF is trading 9p left as KRW appreciated along with other EM currencies. Equity markets in Asia are flat to negative. Nationalized banks continue to be on bids. A daily close below 66.50 can take USDINR to 66.10, which I would not expect and therefore go long for the medium term at current levels with a stop of 66.45. To reiterate, I see 2 strong supports in USDINR at 66.50 and 66.10 and therefore would create longs near these levels for a move to 67.50+ in the next 2 months. For the day, CMP 66.61, Range 66.55-66.70.

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