Trump is perhaps opening a new front in his trade war campaign
and now facing the heat would be Japan. Although it is known that the US is
likely to announce duty on $200 bn of Chinese imports, but the announcement
could still lead to a risk off as the focus would shift to Chinese retaliation.
Given the continuation of the trade war
rhetoric and strong US data it is likely that we should see USD index breaking
above 96 (CMP 95). Oil has gradually come lower because of higher inventories
plus mildly deteriorating risk sentiments.
USDINR 1m NDF is trading 11p right while 1y is trading 31p
right only, this shows that there is no incremental offshore buying pressure on
USDINR. Oil has gradually drifted lower from 79 to 76.3 now while other EM
currencies have been stable over the last couple of days. India 10Y bonds are
at 8.04%, off from the yield highs of 8.1% on Wednesday. All this would suggest
that a break of 72.11 would need a fresh trigger and doesn’t seem likely today.
RBI would want to create sharp two way movements so the correction could take
USDINR to 71.45 levels which gives me a broad range of 71.45-72.20 with likely
break higher. CMP 71.91, Range for the day 71.70-72.10.
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