Market’s have started focussing on Euro zone economic strength as the rate differentials get ignored. The fact that US is going to hike rates in December is clear and stronger CPI and retails sales data therefore had limited impact. There is still mild uncertainty on the tax bill and passing of the same can push UST yields higher. Overall in the two and a half month uptrend in USD index the momentum build up was weak indicating that the same was not a reversal. Now with the trend broken we might be seeing the major trend of USD weakness starting again.
Yesterday KRW appreciated strongly to its highest levels since October 2016 which shows that the North Korean crisis is behind us. Other EM currencies have also appreciated since yesterday night. USDINR 1w and 1m NDF trades 1-2 p right indicating mild offshore buying pressure, as FIIs continue to pull small amounts out of Indian debt and equities. India 10Y yields has moved higher to 7.06 levels again. Most participants are looking to sell near 65.40 levels after yesterday’s selloff. CMP 65.35, Range 65.42-65.15.
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