Morning INR update: EURUSD capped by ECB as US growth concerns watched

Yesterday Draghi was positive on growth but showed little confidence in inflation reaching its target any time soon. Along with this Draghi said that the committee did not discuss tapering. These developments show that ECB (whose monetary policy has been a currency policy in disguise since 2014) is not comfortable with a higher Euro as of now. EURUSD which has been modelled similar to a Rajan era USDINR, empirically, doesn’t move without ECB’s blessing and therefore should now remain capped at 1.0950-1.10, in spite of French developments and growth outlook.

US durable goods (without aircrafts) and pending home sales order came in weaker. GDP tracking for Q1 is below 1% (consensus at 1.1%) and a lower print today can drive UST yields lower. Q2 GDP tracking is around an aggressive 3% but with debt ceiling and other policy uncertainty, likely downward revisions could weigh on yields further. Thus dollar index as such would have limited upside here as EURUSD should trade in a tight range of 1.07-1.10 until further ECB talk. Lower US yield view could be captured through USDJPY shorts which faces tough resistance around 111.40-111.80 zone (CMP 111.15).

USDINR 1m NDF is trading 4p left as compared to 7p yesterday showing increased demand for the pair. Equity markets in Asia are negative as commodity prices register substantial correction weighing on China particularly. KRW has depreciated on the back of Trump’s security charges demand. This reaffirms my assumption that US intervention in N Korea would be paid back by S Korea and Japan in the medium term through stronger domestic currencies, positively affecting INR. We have witnessed aggressive buying by nationalized banks over the last 2 days. CMP 64.24, Range 64.29-64.15.

Morning INR update: Intervention prevents further appreciation

Trump’s tax cut announcement lacked clarity on implementation and therefore was largely ignored by the markets. The new healthcare bill is also yet to be passed by the Republicans themselves.  The directional move in UST Yields and US Dollar might be decided in the next 2 days as ECB sets the Euro tapering path today and US GDP tomorrow (where a lower print can change rate hike expectations). On the debt ceiling impasse, news flash suggest that the government will get a 1 week period to work out plans and to temporarily avoid shutdown.

USDINR 1m NDF is trading 5.5p left as compared to 9p left yesterday morning. EM currencies have mildly depreciated over yesterday. Nationalized banks bought USDINR aggressively yesterday from 63.95 and have been seen on bids today as well. Equity markets in Asia are negative to flat although technically European, US and Indian equities look poised to move higher. Upticks in USDINR could be sold as we can see more inflows over the last 2 days of the month. CMP 64.09, Range 64.15-63.95.

Morning INR update: Risk on sentiment to take USDINR to 63.50?

Risk on sentiment to take USDINR to 63.50?

US yields went higher in anticipation of tax cut announcements today by Trump. Trump is expected to give a road map of corporate tax cuts and how they would come down to 15% from the current 35%. It would perhaps materialize (or fail) by September when the US budget is discussed. USD index has broken an upward sloping trend line and a weekly close below 98.80 (if accompanied by US 10Y yields below 2.25%) could drive USD index towards 96 levels. This could be supported by Draghi who is likely to accelerate taper and interest rate hike expectations tomorrow or in the next ECB meeting, as the outlook on EU political risks becomes positive. USDJPY continues to move higher with equity markets and against the trend of dollar weakness making a directional call difficult at the moment. Weekly close in USDJPY above 112 would make me change my view of USDJPY moving lower towards 107.

My expectation on USDINR 1 Y forward is that it should come lower towards 275-250 levels. Contrarily, it has been paid by Nationalized banks as RBI bought USDINR spot and built forward reserves. My stop was a weekly close above 333 which has not been triggered as yet (current levels 329). Current interest rate differential is at 5.35% and USDINR 1Y forwards are at 5.15%. Seasonality suggests that in May 1 Y forwards come lower and a receive side trade here therefore looks attractive.

I have been expecting USDINR to come lower since 64.48 and was expecting the pair to break 64.25 overnight. USDINR 1m NDF went left yesterday to 9p as markets started expecting a few bond inflows in the last few days of the month. INR has again appreciated ahead of other EM currencies again but this is not a decision making factor for RBI/Government currently. Nationalized banks continue to buy although not decisively. Price action suggests that there is some inward flow in the market and therefore we might see another move lower during the day as nationalized banks pause their buying (we have witnessed them moving away every now and then in the last 2 months). We might head towards 63.50 in the next week as equity markets make new highs world over and India is dubbed as the outlier on the positive side. CMP 64.00, Range 64.10-63.75.

Morning INR update: Weaker US data and stronger equities

Market seems to be factoring in that Trump will continue to tweet but not deliver. The fact that equity markets are rising in spite of this shows that the rally is France election results led. Thus if Trump surprises tomorrow and delivers tax cuts (without Border Tax) then US equities would rally along with global equities. USD would strengthen against G7 but equity would guide risk currencies towards appreciation. If Trump fails on the tax cuts then USD would weaken while equity markets might register mild negatives only. Thus I would say that Trump is perhaps a little less important for risk sentiments now. Similarly debt ceiling issue might affect USD and yields more than it would affect equity markets.

US data continues to surprise on the lower side with Bloomberg data surprise index moving lower since end March 2017. US GDP growth for Q1 is expected at 1.1% (due on Friday) and a negative surprise there would strengthen the belief that US economic activity in 2017 is not as great as the previous year. On the other hand markets are watching the ECB on Thursday to ascertain what Draghi has in mind for the Euro and whether the single currency will be allowed to appreciate.

USDINR NDF 1m has moved 7.5p left as compared to 3p left yesterday indicating offshore selling. Debt inflows along with Masala bond conversions due tomorrow would be leading to selling in the offshore market. Other EM currencies have not registered incremental appreciation since yesterday therefore we might see significant Nationalized bank buying around 64.30. Yesterday nationalized banks bought aggressively at 64.44 levels. Debt inflows continue to pour in with USD 4bn coming in April too. Given the global risk on construct indicates USDINR might break the support zone of 64.25-64.30 today or overnight. CMP 64.32, Range 64.38-64.25.

Morning INR update: Challenging week for Trump

Markets were concerned that two anti EU candidates might make it to the second round of French Elections. Now with only one anti EU candidate qualifying, the markets are optimistic that Macron (pro EU) would easily defeat La Pen (anti EU) as polls suggest that 70% of French want to stay with the union. Expectations that with Netherlands and now (perhaps) France political risks behind us, the ECB might cut down on its accommodative policies driving EURO higher along with general risk sentiments.

Trump has set up a steep challenge for himself this week. On Wednesday Trump is likely to announce tax cuts and introduce a new version of the healthcare bill in the house. By Friday the debt ceiling has to be raised to prevent the government from getting shut. Never before has the US government gone into shutdown with the same party controlling the white house, house of representatives and the senate. Therefore a shutdown now perhaps would be the final nail for this administration coming from within the party. The tax cut plan is unlikely to contain border tax (according to news reports) making it look like a very ambitious claim, lacking revenue neutrality which therefore will be difficult to pass in the house. The markets have taken Trump’s tax cut announcements with a pinch of salt as US 10 Y yields have gone up mildly on the back of this and French election results as well.

Risk sentiments lack momentum with the 3 Trump events in focus for the week. If the tax cuts go through (without border tax) we might see the Trump trade (higher US yields, stronger USD against G7, higher equities and perhaps stronger EM currencies) coming back on the table, but right now it looks difficult. USDINR 1m NDF is trading 3p left indicating increased buying pressure in the offshore market on the pair. Levels on KRW indicate that the warnings from North Korea have been taken as hollow by the markets and the tensions are receding. CMP 64.52, Range 64.60-64.45.

Morning INR update: Waning risk momentum

Teresa May announced early elections in June 2017, riding on a wave of populism. Polls suggest that her party has at least 20% points more support than the second party currently in the UK population. May wants to use this support to get higher number of seats in the Parliament, in order to ensure that Brexit negotiation with EU doesn’t get opposed in the house. This bodes well for UK’s negotiating ability with the EU, i.e., only if May wins a higher number of seats, which as of now looks likely.

The negative surprise in US data print continued with Industrial Production printing below consensus. US10Y yields have started showing the weakness in data but with little impact on equities till now. Euro zone CPI which has been steadily increasing on YOY basis can take the dollar index below 99.50 support.

USDINR 1m NDF is trading 4p left only indicating reduced selling in NDF markets. Yesterday we saw nationalized banks selling near 64.60 levels. Indian equity markets have started showing signs of weakness. Other EM currencies trade stable. CMP 64.56, Range 64.62-64.46.

EURUSD view: French Elections - Le Pen fails to arouse curiosity!

The general view for French elections seems to be:

·        In the first round none of the candidates will get more than 50% of the votes so a second round looks inevitable

·        2 candidates will make it to the second round and Marine Le pen might emerge as the highest vote grosser in the first round

·        In the second round, the distributed votes will mostly go to the other candidate (against Le Pen) because of lack of acceptance that Le Pen faces in the larger population, thus the chances of Le Pen becoming French President seems low.

This view is reflected in the Euro and DAX which seems to be trading stable currently.

I would think that one of the reason that Trump became President was because of the curiosity he invoked leading to familiarity (although negative) which got converted to votes. Marine Le Pen doesn’t seem to be able to arouse the same curiosity either as Francoise Fillon seems to be leading the search hits on Google in the last 1 month (see screen shots below). Trump led search hits on google consistently over Clinton in the preceding 1 month to the elections while Le Pen is trailing Francois Fillon in spite of her far right anti establishment rhetoric.

Thus a trade idea could be to buy EURUSD on dips after the first round Le Pen victory. I would expect Euro to test 1.05 if Le Pen makes it to the second round. EURUSD looks like moving higher as UST yields have moved lower on the back of negative surprise in US data over the last fortnight.

First round 23^rd April 2017-04-18 and second round on 7^th May 2017.

Morning INR update: Commerce ministry defends stronger INR

Mnuchin again contradicted Trump on the President’s concerns on a strong dollar. It would not be an accident or a dare that a Treasury secretary can state the opposite of the President consistently, and therefore must be by design. The idea could be to message particular countries only (may be the ones in the list of 6) while Mnuchin ensures that US Treasury holders don’t get scared with a weaker dollar rhetoric.

Reading the Treasury’s report on the list of 6 countries it seems that the immediate target for currency adjustment for the US would be JPY and KRW. China would get a slightly longer rope because of its interventions in the last 6 months to prevent further depreciation of the Yuan and its cooperation in North Korea. While Germany’s currency is tied to the rest of the EU which would make a bilateral argument difficult to implement on the Euro.

In September 2016 there were reports that the commerce ministry would make a representation to the finance ministry to demand a more competitive INR. In an interview published yesterday Nirmala Sitharaman, the commerce minister has stated that INR is not that overvalued. She goes on to state that currency is representative of the overall state of the economy and is not the only tool to incentivise exports. This shows the changing approach of the government on currency since Dr. Rajan’s era and therefore further strength of the INR is possible and specially on a carry adjusted basis.  

NDF points are moving right showing reduced offshore selling and unwinding. EM currencies are moderately weaker today on the back of dollar strength. Yesterday we heard government payments going through and today we hear similar chatter in the market. Nifty is higher on the back of recovery in the Dow while Debt inflows continue. CMP 64.54, Range 64.45-64.73.

Morning INR update: Weaker US data drives yields lower

On Friday US retail sales and CPI both disappointed, adding to the lower UST yield view in the short term. North Korea tested a missile and it failed to go beyond 4-5 secs which should reduce the concerns of a military standoff. US vice president is in South Korea and US has not issued a directive to its citizens to leave S Korea as of now, which should indicate that immediately the chances of a war is low. USDJPY continued to move lower on the back of lower UST yields and moderate risk off. US vice president is in Japan tomorrow to start the first economic dialogue between the 2 nations since Trump came to power. On Friday treasury report on foreign exchange said that JPY is 20% weaker than its long run average. This along with the North Korean effort by the USA should keep USDJPY in a down trend with first target of 107.

USDKRW should continue to drive USDINR in the short term. Debt inflows continue to flow in with Friday recording 3700 crs. USDINR 1m NDF is trading left by 7p. Indian equity markets are looking weak in the short term although the uptrend is still intact. Since morning we have seen custodian banks selling along with nationalized banks. For the week I would think USDINR should trade in a range of 64.60-64.25. For the day, CMP 64.35, Range 64.26-64.50.

INR and JPY to appreciate post Trump's comments & the recent Geo Political events

No matter how twisted it sounds but the chain of events would suggest the following.

US would have negotiated a currency/trade deal with China in exchange of China cooperating on curbing North Korean nuclear program amongst other things. USA’s motivation to act on North Korea would have been driven by its allies South Korea and Japan. US itself is not threatened by North Korea as an airplane manufactured in N Korea might fail to reach the US mainland, let alone a missile. It is Japan and S Korea that would have wanted US to do something about the rogue state.

US seems to have got a deal to act on N Korea from China. Now it’s payback time for South Korea and Japan. The easiest and instant way to payback would be an appreciating KRW and JPY. JPY price action since last 2 days suggests that BOJ is now comfortable with an appreciating Yen. All this is possible with a dealmaker President who does not refrain from directly commenting on currency levels and interest rates.

USDINR is most dependent on CNH and KRW. CNH is not going to depreciate according to the theory and KRW has to appreciate to payback US. Therefore INR should continue to appreciate towards 63.50.

I would stay away from Euro in spite of a weak dollar view because the ECB seems uncomfortable with an appreciating Euro and EU and US have different terms as compared to the rest of the world.

Chinese support could tame North Korea without a war

North Korea Economic Highlights (source Wikipedia etc)

·        NORTH KOREA GDP of USD 25bn (2015 nominal). That is roughly 0.1% of USA’s GDP.

·        North Korea’s nuclear program and weapons sales represent 40% of the nation’s economy,

·        Financers of business in North Korea -  mainly small banks in China, Singapore, Vietnam and Hong Kong.

·        Exports of North Korea $4bn

o   The CIA World Factbook said China accounted for an estimated 67.2% of North Korea's exports and 61.6% of imports in 2011. South Korea accounted for 19.4% of exports and 20% of imports, while India received an estimated 3.6% of exports and the European Union provided about 4% of imports in 2011.

Why a war with North Korea looks unlikely?

·        Reports suggest that South Korea doesn’t want war with North Korea because of large scale destruction to Seoul in spite of a certain victory. https://www.nytimes.com/2017/04/11/world/asia/south-korea-north-military-strike.html

·        Given this backdrop, it would be easier to choke North Korea financially especially with China seemingly supporting the US. China yesterday returned North Korean coal ships rejecting imports from the country. Although the ban on North Korean coal imports into China was placed on 26^th February. Thus the likelihood of North Korea going to war with the US, reasonably seems low. But then we do not know how reasonable the North Korean dictator is.

·        200k US citizens stay in South Korea and till now there hasn’t been any directive to them to vacate the country. This will be the first sign of US planning strikes.

·        South Korea currently doesn’t have a head of state to credibly take decisions on military strikes. South Korea goes to polls on 9^th of May 2016.

JPY appreciation could have been allowed in exchange of US extracting Chinese support to curb North Korean nuclear program and moving US navy in the Korean Peninsula. Japan has always felt threatened by its neighbour North Korea.

Morning INR update: China going against N Korea?

News report suggests that China has deployed forces on its border against North Korea, while South Korea and China discuss sanctions and actions against the authoritarian state. In another report China has asked North Korean coal ship to go back without unloading, cracking down on North Korean exports to China. Trump has stated that China will get a better trade deal if it supports the US in curbing the nuclear ambitions of North Korea. With Japan, South Korea, USA and China coming together against North Korea, it’s a dispute with little uncertainty of outcome. Although for now it looks that North Korea is showing signs of aggression by sending a navy strike unit towards the US.

It is the most unique risk off sentiment that one would witness in markets, with JPY, gold and USTs appreciating while all other pro risk assets (equities and EM currencies) largely unaffected (since yesterday). Either we should see the safe havens of JPY and Gold retracing (which should be the likely case as N Korea now seems to lack Chinese support) or we should see a fall in other pro risk assets.

USDINR 1m NDF is trading further left today at 7.5p while KRW and CNH are stable to mildly stronger. The two resistance for USDINR are at 64.66 and 64.84 while on the lower side 64.40 should hold for now. Today we have the Indian CPI where the consensus expectations are around 3.9%. Indian equities are moderately negative while inflows have slowed this week. CMP 64.66, Range 64.84 – 64.50.

Morning INR update: Geopolitical tensions dominate.

Korean peninsula risk off sentiment mostly affected the NY session driving yields lower along with USDJPY. Historical equity market selloff in May could be brewing with French Elections, Syrian standoff between US and Russia and US aggression in North Korea. Today Kashkari speaks and since most FED members now seem to be commenting on balance sheet reduction, FED speakers can drive USD higher along with UST yields.

Inflows in debt and equities have reduced this week with weaker risk sentiments. USDINR 1m NDF has moved higher showing reduced selling in the offshore market. An ecommerce company raised USD 1.4 bn USD yesterday, significant chunk of which should be converted to INR, timing unknown. Exporters are looking to sell on upticks while importers seem to be very comfortable after the recent INR appreciation. CMP 64.64, Range 64.75-64.50.

Morning INR update

The risk on plus strong dollar sentiment, continued despite a weaker headline NFP. Low unemployment with same participation rate perhaps made markets take confidence and push up yields in spite of a far less than expected headline NFP. Dudley’s statements regarding balance sheet size reduction further helped push US yields higher. German 10 Y yields have fallen from 0.5% in mid March to 0.22 currently, reversing the expectations of a less dovish ECB.

US air strikes in Syria plus the latest development of US deploying an aircraft carrier in the Korean peninsula, along with reports of deteriorating ties between US and Russia/Iran, all seem to have been digested by the equity markets. Although Asian currencies are mildly weaker because of the Korean geopolitical developments weakening CNH and KRW. The effect of the developments in North Korea would have lesser impact on INR as compared to KRW and CNH. USDINR 1m NDF is left only by 7p as compared to 9p last week. INR weakness would follow losses in Indian equities and as Indian equities look stable now, upside in USDINR should remain limited. CMP 64.44, Range 64.50-64.30.

Morning INR update: Strong INR policy!

The war in Syria is going on for 4 years now and today US struck Syrian airfields with missiles, it was partially expected after the Tuesday chemical weapons attack and the markets reacted with mild risk off moves. US 10 Y which in my view will be the main indicator of a risk off sentiment developing, quickly jumped back above 2.3%, which is being looked at by the markets as a critical support. A weekly close below 2.25% on 10 Y therefore can spoil risk sentiments across asset class.

Markets are expecting US data to be strong and therefore a weaker NFP can take yields lower and result in dollar selloff while a stronger number could be  easily digested (consensus at 175k and earnings growth at 0.3%). Meanwhile the ECB seems to be taking a step back now and from what Draghi said yesterday, it seems that the ECB is likely to continue with the accommodative stance. This can keep EURUSD offered in the medium term.

Yesterday, I changed my view of a buy in USDINR at 64.80 levels for a move higher, for the medium term, to a sell USDINR for a target of 63.50. This is basis RBI’s allowing INR appreciation yesterday after the monetary policy, similar to Feb 2017, which should be a strong signal to the markets about their intentions. The reason for this change of policy could be many and one of them could be to stay out of the US blacklist of currency manipulators. Last week the US has come out with a list of 16 countries that it will investigate for the next 90 days, for Trade and currency manipulation, which includes India. On the other hand reports suggests that Modi is trying for a bilateral meeting with Trump in May 2017, to address the H1B visa issue. Given this backdrop, perhaps India is choosing a stronger currency policy in the visible future.

EM currencies have mildly depreciated on the back of Syrian news. Participants in the USDINR market seem to have a consensus view of a sell now with 64.50 being watched as a support, a break of which can take us to 64.30 in a hurry. There were murmurs of nationalized banks buying at 64.60 but the price didn’t hold. CMP 64.52, Range 64.30-64.65.

Where should USDINR be as compared to other EM currencies?

Where should USDINR be as compared to other EM currencies?

The biggest downfall of indexing is a discretionary base, which can diametrically change the argument, making conclusion a matter of selection.

To answer the above question I take a set of 17 EM currencies (used in the ASIA-H and ASIA-M REER by the government) and assign weights to them basis their trade weights and their market relevance to INR on a day to day basis. Only trade weights would be inappropriate as it totally ignores the capital account flows (Korea and India are correlated when it comes to risk sentiments and capital flows but the trade weights assigned to KRW in a REER index of INR is very low). The weights are given at the end of this note.

Results

The table below shows the USDINR levels as compared to other EM currencies for various periods in the past.

Comparison	Em Currency Appreciation / Depreciation	INR Appreciation / Depreciation	Comparative USDINR value	USDINR should move?
Last Month	0.6%	2.6%	66.30	UP
Last 6 months	-1.4%	2.6%	67.65	UP
Last 2 years	-9.0%	-4.0%	68.13	UP
Last 6 years	-33.6%	-45.8%	59.56	Down
Since 2002	-17.8%	-34.7%	56.84	Down

INR has been kept at undervalued levels in the long run

In the long run, i.e., from 2002 till now INR depreciation has been far higher than other EM currencies. This is in contrast to the current belief that INR REER being near 116 levels makes INR overvalued. If compared from 2002 or 2011 beginning USDINR should have been 56.84 or 59.56 vis-à-vis other EM currencies.

Post 2011

On the other hand any base selection from 2011 onwards will make INR look overvalued currently. Basis the price action over the last 2 years and last 6months in other EM currencies, USDINR should have been 68.13 or 67.65 respectively.

Policy Choice?

The fact that after the FEB 2017 RBI policy, USDINR started its downward journey from 67.50 and today post policy Nationalized banks allowed INR appreciation seems to suggest that INR appreciation is a choice that has been made. The reasons to choose INR appreciation now could be the following:

-        Correct the long run undervaluation of INR that has been maintained in the long run (see table above for last 6 years and since 2002). There is enough empirical evidence to prove that India has achieved stronger export growth with a stronger INR than with a weaker one. In 2012 as per this same index INR was 22.7% undervalued but still 2013 happened.

-        Ensure that India is not marked by the US as a currency manipulator.

-        Release the excess RBI capital, which was built through INR depreciation to support growth and control inflation. A stronger INR would also support dollar borrowers helping banks to improve their NPA.

As I said it’s not a conclusion but a choice. There are enough arguments to choose from on both sides of the currency debate and here India seems to be choosing a stronger currency. I personally think that a stronger currency is good for a country which has a current account deficit and has good political and financial markets stability but that is normative and beyond the purview of this note.

View

Now with 64.70 broken USDINR can head towards 64.30 levels.  A break of which can push it towards 63.50.

Weights used

Currencies	Relevance	Weights
CNY	High	16
KRW	High	14
SGD	High	11
HKD	Medium	5
VND	Medium	5
MXN	Medium	5
THB	Medium	5
MYR	Medium	5
TRY	Medium	5
ZAR	Medium	5
BRL	Medium	5
RUB	Low	3
BDT	Low	3
PHP	Low	3
TWD	Low	3
IDR	Low	3
LKR	Low	3

Morning INR update: RBI's liquidity problem!

The FOMC minutes showed that the FED is thinking about reducing reinvestments sooner than market thought (by the end of this year itself). This should have resulted in higher US yields and stronger dollar but that was not the case perhaps due to slightly negative equities on account of Trump’s meeting Xi and below expectation print for Services ISM in the US; Nevertheless I cannot rationalize the price action. A break of 2.3% on the lower side in US 10 year yield (weekly close), technically looks like a bearish signal which can take it to around 2% and at the same time create a risk off environment globally.

Today we have the RBI policy wherein the rate decision is a consensus of no action. What would be interesting is how RBI handles the excess liquidity floating in the system. A CRR hike reduces bank profitability and I would think that the government would not want PSU bank profitability to reduce currently (given that most liquidity resides there), which could prevent RBI from hiking CRR substantially (1% CRR hike sucks out 100k crore of liquidity only). Therefore an additional interest paying measure is what I would expect. If the liquidity problem is addressed then RBI will not be forced to pay forwards in case of its interventions from the buy side, perhaps facilitating a lower move in forwards.

USDINR 1m NDF trades 8p left while EM currencies have depreciated on the news of FED balance sheet reduction by the end of this year. Yesterday the markets saw bond inflows of Rs. 5k crores which drove USDINR lower although we saw moderate bids from nationalized banks. Immediately USDINR might face tough resistance near 65.20 levels but at the same time a break of 64.80-70 levels looks more unlikely now. CMP 65.02, Range 65.20-64.95.

Morning INR update: Expectations of reduced inflows.

Dollar index continues to bounce from the 99.2-99.5 zone. This week is important for US yields and USD, given the 2 ISM prints and NFP on Friday. Given the trend of data, a strong print can make the market factor in a June hike (current chances at 57%) and drive Dollar index higher along with equities.

Given that the new tax structure for FPI investments, under which FPIs will have to pay short term capital gain tax on their investments through Mauritius also, kicks in from today, I would expect the FPI inflows to moderate as compared to what we saw last month. USDINR 1m NDF is trading 11 p left along with moderately stronger EM currencies. We have seen nationalized banks buying aggressively since morning reinforcing my belief that USDINR is near its bottom. I would initiate longs at a close above 64.95 only, although it looks difficult today. CMP 64.78, Range 64.85-64.68.