Not much news globally. US China trade deal remains on card
while the FOMC minutes and ECB gave further confidence to the fact that DM
monetary policy is going to remain accommodative for longer period of time, which
is risk positive.
USDINR 1m NDF is trading 6p right as near term forwards are
going higher again because of excessive systematic dollars ahead of the RBI
swap on 23rd April. Last month when the same thing happened USDINR
got sold. Oil moving higher is mainly because of productions cuts while world
demand outlook doesn’t support a higher price forecast. The bond sale/stake
sale inflow pipeline for USDINR looks strong for the next 2-4 weeks. Most of
these would be done before the May 23rd election results as the
decision makers would not want to run a digital risk on a stake sale /
necessary capital raising plan. I would continue to expect 69.50-68.50 range
for USDINR for April with a possibility of a surprise on the lower side given
the flows pipeline. CMP 69.02, Range 69.15-68.74
Hi Saket could you please explain how would excess dollar in the system would lead to spiking of near term premium and even the one year premium is also seeing some spike.
ReplyDeleteBank's have arranged for dollars in their nostro accounts to bid during the RBI auction. The objective being to convert it into INR funds of 3 years at attractive INR costs. But these dollar funds lie idle in their nostros till the time the auction happens or they decide to swap it for longer term in the market. Till such time banks sell buy these idle dollars for the near term, like 1 week or 1 month to generate INR funds which can be used for day to day funding. This pushes up near term forwards.
DeleteThe LEF circular from RBI in the beginning of April makes matters more complicated but I think theoretically the above explains the reason.
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