If Chinese government officials are asked about halting investments in US treasuries they could not have agreed to it and expectedly today morning they denied of such a move. On the other hand the information was leaked to Bloomberg which would have checked its sources before broadcasting the news. Therefore the news yesterday has merit. One theory suggests that Chinese might be mounting its attacks as investors on the US, before the various trade reports being tabled in the US congress in Jan 2018. Reports on Steel, Aluminium, Solar equipment imports from China along with an investigation on intellectual property rights on China is expected to be tabled this month. Generally any comments out of China is bad for risk sentiments and the sequence of events remind me of August 2015 when Chinese devalued their currency in order to make US cognizant of the impact a hurried rate hike would have on Chinese recovery.
USDINR 1m NDF is trading 3p left only while USDINR failed to sustain yesterday’s gains. KRW and CNH are also trading slightly weaker than yesterday. Asian equities are marginally in the red as well. Yesterday Indian bond yields weakened after the Chinese investment news. Basis the above I would expect risk sentiments to be subdued today. We will have to wait for USD index to convincingly break 92-92.6 range before deciding on the direction of INR. CMP 63.75, Range 63.65-63.85 with a possibility of a break higher.
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