INR update: Pledge for stable Yuan leads to Rupee gains

The idea of waiting for Euro breakout confirmation until 22^nd of February weekly close worked as EURUSD is trading back above 200 WMA. In addition to US-China trade tensions now we need to watch the auto tariffs that US might impose on the EU and how the reaction to the same. On the other hand EU data continues to weaken at a faster pace than US data, indicating that the ultimate direction for EURUSD could be lower only.

Oil prices are rising on account of production cuts and possible US sanctions on Iran and Venezuela. A weekly close above 68.30 on the Brent should bring in 70+ levels which could take USDINR towards 72.50. Higher oil along with stronger dollar against the Euro could take USDINR well past 72.50, therefore this is one scenario importers should be worried about in the near future.

CNH appreciated on back of news that US wants China to keep a stable currency. This led to 0.9% appreciation in the Yuan since yesterday and strengthened most of the other EM currencies. USDINR traded near 71.60 yesterday in the offshore markets and since then has appreciated by 0.6%. USDINR 1m NDF is trading 4p right. Brent near 67 levels should keep USDINR well bid. USDINR should continue to trade in the range of 71-71.50. For the day, CMP 71.20, Range 71.15-71.35.