Today we have the FOMC where the FED might acknowledge the
recent string of weak data but would not want the June rate hike probability to
fall below 50% (currently at 67%), in order to keep the June rate hike on the
table, provided data over the next 1 month supports. US manufacturing ISM has
been printing lower in the last 3 months and if the trend shows in services ISM
too today, then we might see USD index falling too as upward momentum failed in
spite of the debt ceiling deal reached over the weekend. For USD index a daily
close below 98.5 could start a down trend towards 96 levels.
USDINR 1m NDF is trading 4.5p left like yesterday. FPIs
continue to pull out moderate sums from equity markets while debt continues to witness
mild inflows. FPI inflows have slowed down considerably over the last 2 weeks.
We have not witnessed significant importer interest in USDINR at the current
dips while the market largely expects INR appreciation suggesting that largely
the positioning will be short USDINR. The range for the May 2017 should be
63.80-64.70 with a possibility of a break lower. I would expect an uptick to
64.70 given the slowdown in FPI inflows and large short USDINR positioning
while the major trend remains lower, as regular FDI/debt inflows can continue.
Uptick to 64.70 over the next month can be used to create new positional
shorts/longer term export hedges. For the day CMP 64.13, Range 64.20-64.05.
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