The bounce in EURUSD on Friday ensured a closing above 1.15
and USD index closing below 200 week moving average again, indicates that
Euro stays in the range of 1.1450 and 1.1750 for now. The dollar index could
break higher only when it is clearer that the incumbent Republicans retain both
the houses in the November mid terms. Till then the dollar index could stay in
established price ranges even though the US 10Y is at 3.2% on the back of the
latest tax cuts for middle income groups in the US.
The RBI sold $5.1bn in the week following its monetary
policy where it surprised the markets by retaining benchmark rates. This shows
that action resulted in commitment to ensure that Rupee doesn’t depreciate
further on the back of the monetary policy decision. The move has helped drive
away reckless USDINR longs from the market. On the other hand the sharp sell
side intervention will also ensure that RBI would buy aggressively at lower
levels like 73 to 73.25 as the erosion in Reserves for this year has already
been significant above $40bn. This should result in USDINR trading in a narrow
and well defined range of 73.25-73.75 until global dollar or oil cues provide
new insights.
USDINR 1m NDF is trading 4p left like Friday while FPI
outflows have abated. Oil trades below 80 levels while other EM currencies have
mildly appreciated since Friday. Indian equities continue to exhibit selling
pressure as they pared early gains. CMP 73.25, Range 73.20-73.40.
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