US data continues to surprise on the downside as the debt ceiling
can was kicked down until September 2017 making yields rise and supporting USD
index. On the other hand Q2 GDP tracking hovers well above 3% supporting the dollar
index. Oil fell on the back of increased production in Libya. Oil price
stability or rise is critical for the entire global reflation theme and a
further decline in price can adversely affect all risk sentiments. Trump’s
willingness to talk to North Korea helped KRW and Asian stocks even though
Chinese PMI marginally disappointed.
The chief economic adviser on Friday commented on INR
appreciation’s negative impact on exporters but contradictorily Nationalized
banks sold aggressively at 64.35 to prevent USDINR from going higher. The
failure of CEA to verbally talk up USDINR would further embolden the sellers.
Since morning we are hearing chatter about custody flows and have seen large
nationalized banks on offers. Risk sentiments seem supported as KRW has
appreciated 0.7%. May seasonality would have to be ignored for now. CMP 64.16,
Range 64.20-63.95.
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