US yields came off on the back of developments in Russia investigations where a grand jury was appointed. EU data continues to point at strong growth while US data surprise has also been positive this week, perhaps pointing towards a stronger NFP number. Average earnings would be more important than the headline number as the problem in the US currently is price growth not job growth itself. A print significantly different from 0.3% could move yields quite a bit, making it an interesting Friday evening.
The fall in 1y forwards from 295 to 278 in 2 days, shows that Nationalized banks have stopped paying forwards. If that is the case, then increase in MSS limit from Rs. 1 tr to Rs. 2.5 tr could have been a step towards bringing forward levels lower. If RBI would want to discourage speculative selling of USDINR then a lower forwards were desirable and this is a step in that same direction. Currently forwards are at 4.4% pa while interest rate differential is at 5% pa. If forward are not intervened and paid by RBI, then 1 year forward points have the potential to fall significantly below the interest rate differential by 1.5% to 2% (historically seen differences). Therefore if India positive sentiment continues (which is likely), forwards have the potential to go towards 3.5%pa or to 220p with 246 as the first support.
USDINR 1m NDF is trading 7.5p left which indicates offshore selling. Nationalized banks bought USDINR yesterday and today after not buying on policy day, strange but that is what it is. EM currencies are trading slightly stronger than yesterday while equities are flat. CMP 63.67, range 63.71-63.56.
No comments:
Post a Comment