The ensuing trade war between the US and China could result in a weaker Yuan and negative equities for the time being. Similarly it seems the decline in Euro could continue as the rate divergence increases and perhaps this also is related to the trade war. On Wednesday Powell, Draghi and Kuroda speak in a panel discussion in Sintra, which would be crucial specially to ascertain what Draghi’s stance is, in an international forum. Opec meeting over the coming weekend could result in an increase in oil production (although opposed by Iran and perhaps 2 others) which in turn is driving oil prices lower.
USDINR 1m NDF is trading at 30p pr 7p right. Other EM currencies and specially CNH and KRW have depreciated since Friday on the back of the trade sanctions. Oil prices and inward flow expectations are helping INR for the day as it opened at 68.15 and got sold off to 68 levels. The government and RBI seem to be concerned about depreciating INR as is evident from the revised FII guidelines released on Friday and aggressive intervention in the market. On Friday evening USDINR went higher than 68.40 in the offshore market. Between supportive CAD and inflows on one side and weakening EMs on the other, global currency trends should prevail. The medium term range has now shifted to 67.80-68.46. CMP 68, Range 67.87-68.20.
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