The excessive EURO long positioning of the market has resulted in a sharp decline in EURUSD before today’s FOMC. A break of 1.1936 could bring in 1.1550 (although unlikely). US10Y has failed to comprehensively break 3% while 10-2 spread is still hovering below 50 bps only. Both these would suggest that dollar strength could have limited momentum after today’s FOMC. I would look at 92.56 on dollar index and 1.1936 on EURUSD on weekly close basis, as crucial levels to ascertain further direction for the dollar. Fresh EU data in the new month will also be critical to ascertain if the negative data surprise of the last 2 months has come to an end or is continues.
RBI measures to attract more short term investments in government/corporate bonds plus to allow higher cost ECBs, is likely to affect yields (if at all) rather than rupee. One year before next year elections short term debt investments would come in only on a currency hedged basis (for arbitrage purposes). Therefore the impact of these measures is unlikely to result in major inflows on spot. Since I am looking at 92.56 as a strong resistance on dollar index I would expect 67 to hold on USDINR. On the other hand RBI’s Friday announcement shows concern on depreciating INR in the policy circles, therefore RBI should increase intervention if INR depreciates further. The move up would only happen if dollar index breaks this level and moves to 93.5/95.15, in which case RBI would also stand aside. For the day CMP 66.77, Range 66.70-66.95.
No comments:
Post a Comment