The dollar index is gaining strength ahead of the FOMC (21stMarch) where the markets expect the committee to be more hawkish with 2018 forecasts on rate hike, economic growth and inflation forecasts for 2020-21. The price action could be similar to what happened during the last ECB where market expected the ECB to remove the statement concerning addition APP, and it did, Subsequently Euro rose by 50 bps and then got sold off by 150bps. Similarly dollar strength could continue till the FOMC is behind us taking the index to 90.55/90.93 levels (CMP 90.3).
Risk sentiment continue to remain subdued while USDINR 1m NDF shows mild buying pressure. This along with dollar strength should keep USDINR well bid during the day. I continue to expect the range of 65.20-64.64 for the rest of March while a sharper INR depreciation (till 66) can be expected April onwards. CMP 65.02, Range 64.99-65.09.
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