Unnamed sources in ECB said that Draghi’s comments have been
misinterpreted which perhaps indicates lack of confidence in inflation and
could show in tomorrow’s EU CPI data. FED gave a go ahead to US banks to do
buybacks and pay dividends signalling adequate capitalization, which was risk
positive while iron and other metals rose on the back of Chinese demand in
commodity markets. Carney again did a U turn saying that some amount of
stimulus could be removed in the second half making GBP directionally uncertain.
The fall in yields for US 10 Y from 2.25 to 2.22 has helped alleviate the mild
EM currency depreciation that we were witnessing on the back of hawkish central
banks.
Debt inflows of Rs. 2000 cr yesterday were on the back of
long term investors who brought in Rs. 1400 crs and could indicate increasing
investor appetite in Indian debt. If this is sustained then it could be a huge
INR positive as the long term category still has ample limits left unlike the
open GSEC category.
USDCNH is trading below 6.79 while KRW has appreciated by
0.5% since yesterday. Equity markets in Asia are moderately in the green
creating a better risk environment than yesterday. With month end demand mostly
behind us and quarter end selling perhaps pending we can see some INR
appreciation. Also the increase in debt limits in July could drive some amount
of speculative selling in USDINR. CMP 64.46, Range 64.53 – 64.35.
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