North Korea tensions had a mild impact on risk sentiments as
markets continue to await the FOMC tonight. KRW appreciated slightly which
would make me ignore the geo political issue for now and focus on DM bond
yields as the main market driver for the time being. Stronger EU and US data
from here can fuel further increase in DM bond yields leading to a higher
USDJPY.
FPIs pulled out significant amounts from both equities and
debt markets yesterday with debt market inflows getting disturbed by
anticipation of another OMO announcement by the RBI next week. USDINR 1m NDF is
trading 1.5p left which indicates the current USDINR long positioning in the
market. KRW and CNH have registered small appreciation since yesterday as US 10
y yields fell 2bps. I would continue to trade USDINR in accordance with
movement in DM yields which could go up with today’s FOMC minutes, PMI data in
EU and US factory orders. CMP 64.73, Range 64.65-64.85.
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