INR update: Moderate improvement in Risk sentiments

A deterrent remains effective only till the time it is not used; it is unlikely that Iran will take the US head on by blocking the strait of Hormuz (which is Iran’s nuclear weapon). Like North Korea, Iran’s soul objective is to protect its regime and the regime stays only till the time it gives US an excuse to invade. The most likely response from Iran would be increased proxy war against US troops in Iraq and across middle east. While this will keep markets worried but by the end of this week without any further escalation markets could have totally forgotten the new year incident.

Risk sentiments improved as Israel distanced itself from the killing of Sulaimani. USDCNH trades below 6.96 as KRW also registered modest gains. Equity markets in Asia is in the green. A daily close in USDINR below 71.68 would against open the door for 71.35 (favoured direction). A couple of chunky inflows over the next fortnight should also keep USDINR well offered. CMP 71.72, Range 71.80-71.60.