Stronger Durable goods order led to mild uptick in USD index. Mnuchin comments on currency manipulators led to EM currency depreciation (because of implications on trade agreements) and controlled the dollar strength against JPY. Certain global banks have revised their US GDP forecast (due today), to 3%+ while the consensus is 2.6%. This could indicate a higher than expected print which could send US yields higher along with the dollar index.
Mnuchin’s comments on currency manipulators strengthens the belief that RBI would not want to breach the 2% of GDP mark for FX intervention, watched by the US, as one of the parameters to qualify a country as a currency manipulator or to put in on the watch list. RBI’s intervention till now would be near USD35 bn for the CY2017 leaving it with another ~$8-10bn for the rest of the 5 months. Therefore another month of large inflows like March 2017 or CNH and KRW appreciation might make the RBI allow INR appreciation.
USDINR 1m NDF is trading just 3p left which indicates offshore buying pressure. According to the overnight movement in other EM currencies USDINR could be 64.35 today. Overall sellers will line up at any upticks while nobody seems to be buying the pair. I will continue to expect 63.75 ahead of the RBI announcement on Wednesday. CMP 64.22, Range 64.30-64.15.
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