Tillerson’s firing raises concern on the possibility of Trump scrapping the Iran deal or pressing ahead with further sanctions on China after accusing the country of violating intellectual property rights. This would lead to a heightened trade war and retaliation because of which we are seeing the overnight dollar weakness along with equity losses. A 4 hourly break of 89.25 on the dollar index would bring on 88.5. On the other hand USDJPY if it trades below 106.50 for a couple of hours more, then it can head for the recent lows again.
RBI banning LOUs will ensure that the buyer’s credit as a product is not available to the Indian importer. The alternatives are INR credit and suppliers credit. Supplier’s credit takes time to set up as it needs change in invoicing and could also entail the supplier accepting a bank’s facility letter as it becomes financial creditors in the suppliers balance sheet. Therefore the easiest alternative is INR credit which would result in buying pressure on USDINR as short term debt in the economy unwinds. On the other hand lack of buyers credit would reduce the paying pressure on forwards resulting in forwards coming lower. Thus in spite of dollar weakness the buying pressure on USDINR should keep the pair in the range of 65.10-64.90 for now. The upcoming IPOs could result in testing of 64.64 during next week, but temporarily only.
No comments:
Post a Comment