A Washington Post report suggested that the US will this
week withdraw all sanction waivers from Iran with a target of zero oil exports
from the country. This has driven Brent to 74 levels on account of reduced
supply fears. US retail sales last week alleviated concerns of a sharp slowdown
in growth there which helped the dollar register gains against the Euro. EURUSD
has continued to trade below 200 WMA at 1.1340 and fresh set of week data from
the monetary union or any signs of further pessimism from the ECB should lead
to a large move lower in the pair.
USDINR has given a gap up opening at 69.75 on account of the
jump in Brent prices. Dates of large telecom operators rights issue confirms
that companies would want to get done with capital raising / stake sale/ large
borrowing plans before the May 23rd election results. Corporate
India seems to be lining up to raise dollar funds.
Tomorrow we have the RBI swap window where the Mifor has
already got paid and is trading at 6.1% currently as compared to last cut off
of 5.95%. This could mean that relatively lesser number of players might be
interested in paying Mifor for 3 years which could result in dollar selling
from participants who have gathered dollar funds ahead of the swap auction.
Tomorrow NCLT will pass a critical order on Arcelor Mittal’s takeover of Essar
Steel, this could again result in expectations of large inflow or
disappointment depending on the judgment. Overall given the inflow pipeline a
runaway move in USDINR looks unlikely unless Brent continues to run higher.
Last week after the break of 69.60, the next expected level was 69.85 which has
been seen today morning. In the last 30 minutes we suppose that nationalized
banks have sold USDINR above 69.80 levels. Given this backdrop I would expect
USDINR to remain capped at 70 levels for the next 15 days. CMP 69.85, Range
69.95-69.60.
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