USD index was not able to break 92.57 (61.8% retracement of 91-95.15) in spite of US 10Y yield going higher to 2.55% (+5bps). This indicates lack of inherent strength in the USD and the reinstates the fact that interest rate differential is not the theme that is playing out in the market. Brent is trading higher than 69 with equities globally at life highs reinforcing the risk on environment globally that is underway.
A risk on environment is generally good for risk currencies like INR unlike the last 2 days. INR has been tracking CNH and KRW which are both flat to marginally left. 1mNDF is trading 4p left (same as yesterday) while debt flows was at a healthy Rs.1200 crs yesterday. Debt flows are likely to continue for the next 10 odd days and can be anywhere between 1-2 bn USD. A large QIP flow is also expected later next week. Risk is that continued dollar strength with a convincing break of 92.58 can take the index 1 figure higher. USDINR has a risk of going higher till 63.90 but it remains a good level to sell as I don’t see breaking 64 in the near term. CMP 63.67, Range 63.76-63.48.
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