The major trend in markets is that of higher equities and
dollar weakness against EM currencies. Now with Comey testimony and UK
elections behind us the markets would be more certain and we can see fresh
momentum in equities post the FOMC on Wednesday. Markets will also keenly look
at US retail sales on Wednesday which has been falling for the last 4 months.
Modi is meeting Trump on the 25-27th June
and considering the visa issue that the Indian Prime Minister would want to
solve for the IT industry, currency is the last negative discussion he would
want to have with the President. In the last 1 month INR has under performed
other EM currencies and therefore USDINR could be headed to a new low before the
meeting. Basis this point I will abandon the June end RBI balance sheet
argument which could have led to INR depreciation this month.
FPI poured in Rs. 3k crores again on Friday as limits reach
90%. FPI debt limits should not be an issue as from 1st July another
Rs. 16.5 crs would be added as per the RBI limit schedule. USDINR 1m NDF is
trading 4p left not showing any significant direction for the pair. Asian
equities are in the red as markets await India CPI today (consensus at 2.38% as
per Bloomberg). A below 2.5% reading would accelerate debt inflows as rate cut
becomes more likely in the future. CMP 64.38, Range 64.45-64.20.
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