The Dow was not able to hold onto Monday gains. A weekly close below 23500 on the Dow can open the way for 22900 (CMP 23850). US treasury 10-2Y spread is at 51bps which can make the USD index trend lower, below 89.20 we can expect 88.5 (CMP 89.3). The overall market sentiments seems to be that of a moderate risk off on the back of trade concerns plus tech stocks sell off. In the midst of this currencies should continue to be in broad ranges except USDJPY which can trend lower with risk sentiments supporting a stronger Yen.
INR’s correlation with CNH has become very low and off late it does not seem to be closely following dollar weakness or strength either, may be because of the financial year end flows. Since yesterday it has jumped up by 30p and after 12-30PM today I would expect some correction. India 10Y yields have come off from 7.63 to 7.30 on account of reduced borrowing for the first half of FY 19. This, dollar weakness and RBI policy next week (where could be some increase in bond limits) could bring in a temporary bout of INR appreciation (64.50 next week?). The view for the next quarter is that of slow INR depreciation towards 66. For the day CMP 65.01, Range 65.10-64.89.
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