There is a general risk on sentiment post the NY session in
Friday on the back of reduced concerns on global growth plus increased optimism
on US China trade deal. Dow was up 1% while Asian stocks are also up ~0.5%
today morning. KRW and CNH have shown appreciation since Friday while dollar
has moderately depreciated against G10 as well. This week China macro data on
Wednesday will be important along with US retail sales on Thursday.
USDINR 1m NDF is trading 3p right which is softer than last
week while other Ems have registered mild gains since Friday evening. On Friday
a supreme court decision put on hold a large inflow (of USD 7 bn) that markets
were expecting around end April but in spite of this INR negative news, USDINR
got sold off after an initial spike. This affirms the presence on inflows and a
left side bias for the pair. There are more inflows in the pipeline as per news
reports. Low inflation numbers in India would continue to help bond inflows
while Crude prices spike remains a risk (although unlikely). To reiterate, I
would continue to expect 69.50-68.50 range for the rest of April, which in turn
would make me a seller above 69.30 levels. I would expect a left side surprise
given the flows, risk on sentiment globally plus the RBI swap auction on 23rd
April which should keep the markets flushed with dollars resulting in
intermittent mandatory selling from foreign banks. Near term forwards could
again rise before the auction which can be a negative drag on short USDINR
bets. CMP 69.29, Range 69.37-69.00.
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