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.
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