Friday, January 5, 2018

INR update: USD weakness to take INR towards 63

Globally the theme of USD weakness and positive equities continued. All eyes are on NFP today where wage growth is the most important piece of information and a print of 0.3% and higher can lead to further pricing of FED rates hikes in 2018 pushing near end yields higher. But unless the longer end of the curve also goes up, USD is unlikely to gain. The longer end would go up only on confirmation that US inflation is reaching its 2% target.

 

USDINR 1m NDF is trading 6p left. Nationalized banks are buying but the price is trending lower which is the summary of all price action. KRW and CNH have moderately appreciated since yesterday on the back of USD weakness and risk on environment. Counter intuitive but oil prices going up is good for risk and therefore good for INR at this stage of the economic cycle (see history). INR has moved in tandem with other EM currencies globally and therefore we will see a EM currency correlated move only specially since FII flows are limited. CMP 63.34, Range 63.40-63.20.

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