The weaker NFP headline numer (53k addition to jobs after previous month adjustments) led to mild USD weakness. The average hourly earnings was at 0.3% on expected lines. The USD continues to trade in the broad range of 89.5-90.5 for now and the next trigger could be the US CPI which comes out on Wednesday. Trade war will continue to move markets both ways. The chemical attack in Syria can increase tensions between Russia and Nato members which is already at elevated levels, after the nerve gas attack in Salsbury, England.
RBI increased bond limits but the headline number was less than expected at 0.5% per year of outstanding stock in Gsecs as compared to 1% or higher increment per year. The positive was that the increase in limits was allocated as 50% to open category as compared to earlier 25% which makes Rs. 16k crores immediately available for investment in GSEC open category. Anecdotal evidence from investors suggest that currently the appetite for new investments into India is low and at the same time they do not seem to be in a hurry to withdraw money either. So in terms of flow the increase in limits would not result in an immediate surge of investments which should cap INR appreciation between 64.70 and 64.82. The impact on 10Y yields have been negligible post the announcement.
USDINR 1m NDF is trading 4p left while all EM currencies have appreciated on the back of overnight dollar weakness. Equities in Asia are slightly positive in spite of the losses on the Dow. For today INR could appreciate to 64.70 levels while in the medium term it looks that these levels could remain the bottom for USDINR. In April I would expect the pair to move higher than 65.50. CMP 64.87, Range 64.70-64.93.
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