NK crisis seems to have escalated although Tillerson has started talking down the threat. FED speakers impressed upon the need for balance sheet reduction to start in Sep 2017 itself. Today in Fed speakers Dudley’s comments would be important along with US PPI release ahead of the all important US CPI tomorrow.
USDINR has moved higher looking at KRW while CNH has appreciated to 6.68 levels. The move is offshore positioning driven as shorts have cut positions. Most other EM currencies do not justify the move up to 64.05 currently, but this goes to show the short term correlation USDINR has with USDKRW. In the longer run KRW is not correlated with INR (since 2010 KRW has hovered around 1150 +/- 10%) and currently more so as fundamentals are very different. For one the geopolitical factors are not comparable and second the real rate in SK is -1% as compared to +4% (currently) in India. Given these factors I would want to use KRW led USDINR upticks, to add to USDINR shorts.
USDINR 1m NDF is 3.5p left indicating reduced selling pressure. CNH has appreciated markedly to 6.68 while Asian equities are in substantial negative. The day does not look great for risk. The intraday trend in USDINR is higher. CMP 64.06, Range 64.15-63.92. A closing above or below 64 today, would give direction for subsequent moves.
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