The government shutdown in the US would ensure that the risk assets rally pause for a while but any substantial correction is unlikely. There is a possibility of an agreement which allows government funding till February 8th. Angela Merkel’s government formation got a boost with coalition partner SPD voting in favour of starting talks with the former Chancellor’s party to form a coalition. Dollar index should trade in a range of 90.1-91 while a break either side would be critical. This week we have the BOJ and ECB where we could see some surprise comments. US GDP on Friday would also be important to ascertain direction going forward.
USDINR 1m NDF is trading 1p left although USDINR has been well bid since morning today. The government’s announcement last week to reduce the borrowing program has been backed by ONGC’s stake purchase of HPCL. This indicates that the government is focussed on ensuring that confidence in Indian bonds, equities or currencies does not deteriorate in excess of global queues. This should ensure that INR continues to move in tandem with other EM currencies and to a certain extent with the dollar index. 63.95 was a critical level and since that has been broken we can see 64.12 today. CMP 63.96, Range 64.12-63.88.
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