Any future chances of USA taking on NK can be measured by the fact that US avoided going against Russia and China in the UN yesterday, by pushing through a toned down version of UN sanctions. Yesterday’s diluted UN sanctions should put into perspective how unlikely a war is in the North Korea scenario as US would not get a go ahead from Japan or SK and at the same time face China and Russia on the other side.
With the 2 hurricanes causing less damage than previously envisaged US stocks rallied and certainly NK situation helped. Next major market event is FOMC where the FED is expected to announce balance sheet reduction timelines. Market seems to have priced in that the FED would announce the same on Sep 20th but given the recent inflation readings and the added pressure of the 2 hurricanes the FED might want to wait and watch. If the FED delays on balance sheet reduction then dollar can be further sold off while it would equity positive.
USDINR has moved up above 64 as USDCNH is trading near 6.55 (up from 6.52 yesterday). 1M NDF is trading 5p left indicating offshore selling pressure. Equity markets in Asia are mildly in the green while all other EM currencies have mildly depreciated in the dollar correction. Given the risk on sentiment and dollar strength, opposite forces are at play on INR but currency sentiments should weigh more. Positional shorts should only look to take a stop at a daily close above 64.25 as the medium term view on INR remains constructive. CMP 64, Range 63.95-64.10.
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