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.
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