Contrary to disruption of supply theory, reinstatement of sanctions on Iran should keep the oil prices lower because US wants it. The primary reason for Iran to be continuously under US scanner is the fact that Saudi Arabia is a key US ally and Iran’s foe. Reinstatement of sanctions on Iran by the Republican government would have been a key demand of the Saudis, who had become quite distanced from the Obama administration who had struck a deal with the middle eastern Shea state. Thus now with the demand met oil prices should stay where Trump wants it, i.e., in check.
TRY continued to depreciate yesterday on account of concerns that the central bank’s independence might have been compromised and capital controls might be on their way. Although not related to INR, EM basket effect will ensure that INR appreciation would not happen when TRY depreciates sharply during intraday movements. On the other hand USDCNH continues to move higher after the Friday PBOC measure and further depreciation looks likely towards 6.9. USDINR 1m NDF is slightly left (1p) which shows no significant offshore buying pressure on USDINR. FII outflow pressure has significantly reduced on INR. Medium term range of 69.10-68.30 should continue to hold even if other EM currencies depreciate or dollar strengthen further towards 96 levels. For the day 68.85, Range 68.96-68.70.
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