Considering that FED’s Brainard sounded optimistic about the
global economy it seems that the FED does not intend to bring down June hike
probabilities (up @ 85% now). Therefore my view for lower yields on the back of
dovish FED is fading. I would wait to go long on the dollar as the second round
of Trump - Comey drama starts next week. ECB’s Coeure who has been
hawkish and has been arguing for a case to end asset purchases speaks today at
12-30PM IST and going by the recent past he can take EURO higher than 1.1250
levels (CMP 1.12). US GDP (significant revisions if any) and durable goods
order can move markets today in the NY session.
The fact that OPEC did not cut production as much as market
anticipated, shows that oil supply is not going to drive prices higher in the
visible future, this is INR positive. USDCNH has moved from 6.89 to 8.84
in 2 days. Considering that the government gave 30%-40% weight to China in its
new REERs, this should have a positive impact on INR. USDINR 1m NDF is trading
5p left indicating some offshore buying pressure as compared to yesterday.
Equities in Asia are mildly in the positive while other EM currencies have
mildly depreciated or are flat since yesterday. Given the mixed signals elsewhere
I would think USDINR could track CNH appreciation for the remaining days of the
month. CMP 64.60, Range 64.69-64.45.
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