Two days back Trump threatened to place more tariffs on
China in December while headlines now indicate that a trade deal between the US
and China is likely. Likewise risk swings like a pendulum with CNH leading the
way from 6.98 to 6.90 now. While it’s easy to follow the trend in a fundamental
driven market, in the current scenario the next headline could be very
different.
The market has totally ignored the RBI-Gov spat and it is
likely that there will be no action till the RBI board meeting on 19th
November. With the global risk on move USDINR 1m NDF is trading 3p left while
EM currencies are trading strong. I would still think that the RBI will behave
conservatively and would want to rebuild its reserves (it has spent ~$50 bn of
reserves since February18) therefore I would expect limited downside. Having
said that the momentum is lower and therefore it is not advisable to buy USDINR
immediately. If the pair closes below 72.70 today than there could be room for
further down move and a close above 73 should reaffirm my assumptions. CMP
72.91.
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