BOJ pledged to continue doing what clearly doesn’t seem to be working, as they furthered the horizon by which the inflation target could be achieved, resulting in moderate uptick in USDJPY. Today ECB would be the key wherein a hawkish tone is priced in without incremental action. Given that market believes that ECB might want to wait before acting on asset purchases, the chances of a hawkish surprise are lesser. Therefore risk reward would suggest short EURUSD trades into the meeting.
USDINR 1m NDF continues to trade 6p left while CNH and KRW are mildly weaker than yesterday. Reuters flash of India – Pakistan border skirmish perhaps resulted in a 7p uptick in USDINR from 64.35-64.42, which I think should not affect the markets. Yesterday FIIs bought Rs. 2500 crs of debt and equity which seems to have got absorbed by the RBI in the forex markets. Given the EM currency weakness downside for USDINR would be limited today while inflows and exporter interest would keep the upside capped. CMP 64.40, Range 64.45-64.32.
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