Wage growth in the US has picked up (September and previous revisions) taking YOY levels to 2.9%. This was the one big concern against the rationale of raising interest rates and now with 1%+ real wage growth, the market would expect the FED to normalize policy without much hesitation. This should keep the dollar bid along with the noises of tax reforms in the medium term. The impact could be magnified in USDJPY as Japan heads into election on the 22nd Oct 2017. I would buy USDJPY at current levels for the next 2 weeks for a target of 115. This week we will have the FED minutes on Wednesday and US Retail sales and US CPI on Friday as the most important pieces of information.
USDINR 1m NDF is trading 1p right. EM currencies have appreciated since Friday with CNH appreciating 0.4%. UDSINR traded at 65.60 post NFP in the NY session but then retraced as USD gave up its gains. Equities today are in the positive. GIC being a PSU, market does not expect oversubscription from FPIs and therefore inflows should be limited on account of this IPO. The political certainty related equity market gains post BJP’s (ruling party’s) victory in India’s largest state election in March 2017, is at risk as market now looks at Gujarat elections in Nov-Dec 2017. I would expect USDINR to trade in a range of 65 – 65.70 for the rest of October with a chance of breaking higher. CMP 65.30, Range 65.25-65.40.
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