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.
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