Monday, July 3, 2017

INR update: Higher DM yields and mildly weaker EM currencies

US 10 Y Yields are at 2.33% in spite of weaker inflation data accompanied with dovish comments from Bullard. Markets have taken the coordinated speech from ECB, FED, BOC, and BOE seriously and is looking through data to follow the predetermined hawkish course for now. This should drive the EURO higher against others while USD could gain against JPY and EM currencies. US manufacturing ISM has been falling since FEB 2017 and the release today can give some evidence whether the central bank comments are backed by economic activity or not.

KRW is under pressure on the back of US yields increasing while CNH is trading steady. Other EM currencies are mixed as oil price uptick has helped commodity EM currencies. Debt limits were supposed to be increased effective July but there seems to be no communication from the RBI on the same which could negatively affect INR price. OMO sale announcement has taken Indian 10 Y yields 10 bps higher which can attract debt investors during the week. USDINR 1M NDF is trading 2p left only which indicates buying pressure on the pair. CMP 64.69, Range 64.62-64.84.

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