Concerns of global growth slowdown was exacerbated by US
existing home sales data which showed the sharpest decline in 3 years. German
Zew indicated that people are growingly concerned about the current health of
the economy although the outlook was less pessimistic than before. These clouds
have led to a correction in equities although in currency markets participants
are finding it difficult to ascertain as to which country will be more
affected. Declining Japanese trade surplus data prevented JPY from appreciating
in this risk off environment.
INR NDF 1m is trading 1.5p left today as compared to 2p
right yesterday morning. Brent price movement from 63 to 61.5 has led to a
small INR gain overnight. Other EM currencies are also trading a tad strong.
INR bond yields are not moving higher anymore as market expectation for farm
package moved from above Rs. 2 lakh crore (USD 28bn) to below Rs. 1 lakh crore
of incremental expenditure. Given the sharp and isolated depreciation of INR in
January because of local factors, I would think that USDINR should remain in
71.45-70.90 range before 1st February budget. Visibility beyond the
budget is difficult at this moment, but I would expect USDINR to remain in a
range of 72.50-69.50 till May 2019. For the day, CMP 71.24, Range 71.15-71.40.
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