EURO longs in CFTC cut their positions by USD 3.5bn showing increasing signs of a pause in the EURO rally as GBP gains while US yields rise on the back of tax reform expectations. 25th September that is today, is when markets are expecting an announcement which could take the corporate tax rate lower to 20% while lowering the top individual tax bracket from 39.8% to 35% in the US. This could give US equities a boost along with higher US yields which could drive some amount of dollar strength. The price action could be somewhat similar to what we saw immediately after Trump came in without the volatility involved. But US politics remains highly unpredictable and a failure of these reforms could drive US yields lower as well.
Markets ignored North Korea and Trump’s war of words.
India allocated Rs. 44k crors of Masala bond limits to corporate bonds which would release Rs. 17.5 k crores to open corporate bond category from Oct 2017. USDINR 1m NDF is trading 1p right only as compared to 5p right on Friday. EM currencies are trading stable to stronger vs USD and that should keep INR supported for the day. Indian equities are getting sold depicting changing views on India fundamentals which should keep USDINR supported at 64.55 in the medium term. For the week I would expect a range of 64.55-65.20 and would expect 65.55 to be seen in October 2017. An hourly close below 64.73 could take USDINR to 64.60 for the day. CMP 64.75, Range 64.70-64.90.
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