Dollar index registered moderate gains as 10-2y yield steepened. Into next week’s ECB, Euro might register losses on the back of recent weak data which could result in a more dovish tone from the central bank taking the dollar index towards 90.5 levels.
USDINR 1m NDF is trading 6p right which along with the move up to 66.15 yesterday shows strong offshore demand. EM currencies have depreciated along with INR overnight as equity markets in Asia today is in the negative. Bond markets locally today seem to be much more stable even though bond outflows continued yesterday. Since last 3 days price action suggest that RBI is undertaking decisive intervention during the day. I would continue to think that RBI would not allow standout INR depreciation. On a weekly basis a close above 66.10 could open flood gates of new buyers for the pair bringing the next 1% up move sooner than expected. On the other hand a close below 66.10 could put the pair in the new range for consolidation before it moves up higher towards later. CMP 66.04, Range 66.10-65.85.
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