In spite of a higher US core CPI the greenback weakened reinforcing the theme that the weakness is structural (i.e., fiscal deficit related) and not to do with data per say. To top it the ECB has indicated that it will look to move away from its ultra accommodative stance sooner than previously thought. The market has not allowed JPY to appreciate looking at US yields, as the market realizes that interest rates are not playing out like they did in the recent few years, Yen might give a sharp appreciation from here (Positioning for short Yen continues to be near all time highs) . This is a data light week except from China which releases IIP, Retail sales and GDP data on Thursday.
CNH has appreciated to sub 6.44 levels and INR has been majorly following CNH in the recent few weeks. USDINR 1m NDF is trading 3p left only (same as Friday). Basis the last 1 month EM currency appreciation, USDINR should be near 63 levels. Indian and global equities continue to break highs while the yield pressure is evident across the board as well. FII flows are small while talk suggests substantial amount of bond flows along with possible QIP flows as well. One can expect INR to touch 63.25 again this week with a possibility of a break lower while 63.55 should provide strong resistance. CMP 63.42, Range 63.50-63.25.
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