As many thought, Trump has caught on to Syria and thereby Russia as his next subject for tweeting. Although the rational self knows that a US-Russia war/skirmish is highly unlikely in the foreseeable (and unforeseeable) future, but even then the reality show type tweets, will keep the markets from taking on risk and we will see moderate selling in equities, yields coming off, JPY appreciation and USD appreciation against other riskier currencies like Euro, GBP and EM currencies. This playing to the gallery should continue for a week at least. FOMC minutes showed hawkishness and confidence in economy but the release was overshadowed by social media wars between super powers.
INR came under pressure as Brent crossed 72 levels and local bonds sold off. Back of the pad calculation suggests that 1$ rise in oil price increases India’s CAD by $1bn per year. Saudi Arabia perhaps wants oil to reach $80 to get greater valuation for Aramco whose IPO should happen sometime in 2019. India’s capital account could remain flat or register small outflows till political certainty returns (which could only be after 2019 central elections). Therefore in the current situation dips in USDINR should be bought. Importers continue to be unhedged and therefore positioning would also drive USDINR higher in times of increasing demand. For the day CMP 65.39, Range 65.30-65.55.
No comments:
Post a Comment