Longer term yields had started running up since August 2016 and perhaps they made a peak in April 2018 when markets started expecting ECB to delay rate hikes on the back of weaker data. Now for the shorter term, where overnight rates become more important, the FED might be the next DM (and last one) to delay rate hikes. US2Y yields have not been able to break 2.59 for 3 months and the flattening of 10-2 spread, could push the FED to push shorter term yields lower. With this change in the yield curves, monetary conditions could start looking accommodative again resulting in US and EM equities making new highs. The concoction of lower short term yields and higher equities in turn should keep the dollar subdued, Euro stronger with ample support to EM currencies. Meanwhile German Zew today could provide direction to Euro.
Looking at CNH it seems that the US-China trade story is on the backburner now. The same indicator (CNH) prevents me from buying USDINR now. USDINR 1m NDF is trading flat now as compared to onshore 1 month. EM currencies since yesterday night are mixed while since today morning they have appreciated mildly. Reiterating, medium term range for USDINR 68.30-69.10, with a break resulting in sharp moves. Currently my bias for the pair is lower, i.e., USDINR can head towards 68.40 this week. CMP 68.79, Range 68.85-68.65.
No comments:
Post a Comment