US and NK continue to threaten each other coaxing the other to act first. US equities for the first time reacted to NK threat with yields falling and vols going higher. USDJPY broke key levels and clearly indicates a risk off sentiment. US PPI release yesterday shows the continued absence of inflationary pressure in the US which could weigh USD further down after the CPI release today.
The weekly fall in Korean stocks is the biggest since June 2016 indicating that the market is more concerned about NK-US tensions than it has been in the recent past. India – China news started concerning the markets yesterday as both sides militarised the area. A war between the two countries is very unlikely but the difference itself is enough to spoil risk sentiments. USDINR 1m NDF is trading flat now indicating that we would see onshore buying today. Other EM currencies are not as affected although CNH has depreciated 0.3% since yesterday after making new highs yesterday. Indian equities are 1% in the red. The recovery from here in risk sentiments will be quick but when is hard to guess. A weekly close below 64.19 would keep the down trend intact. CMP 64.19, Range 64.15 – 64.35.
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