The cooling of US 10 y yield to 2.86 and 10-2 spread to 62bps can lead to a softer USD in the short term taking the index towards 88.5 again. Italian elections on the 4th of March don’t seem to be creating a concern in the EU markets as polls do not suggest a risk that the EU separatist Five Star movement might come into power. Powel’s testimony in the congress is likely to be balanced but even then it will give the first look into the thoughts of the new governor. This week has lots of data including US and India GDP, EU inflation and manufacturing PMIs.
USDINR 1m NDF is trading 4 p right indicating buying pressure while since morning we have seen some offers in the onshore market. Equity markets are in the green while Asian currencies have mildly appreciated since Friday on the back of dollar weakness. India bond yields have eased to 7.69%. The lack of buyer’s credit availability in the market should continue weighing on INR and consequently I would not expect USDINR to trade below 64.62 today. Although dollar weakness overnight could take the pair lower if 64.60 breaks. CMP 64.67, Range 64.62-64.75.
Regards
Saket Agarwalla
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