INR update: Yuan gains and inflows continue to support INR ahead of Budget

INR update: Yuan gains and inflows continue to support INR ahead of Budget

The lower than expected US Industrial production was more than partly mitigated by the strong housing starts print on Friday. This week EU and US flash PMIs will give sense about economic activity in the developed world while ECB on Thursday will be keenly watched for the course the central bank takes under Lagarde’s new leadership.

CNH continues to gain (CMP 6.852) post the deal signing and better than expected China macro data release last week. Technically a break of 6.8450 on a weekly basis can suggest another 2% appreciation in Yuan and therefore it is a critical level to watch. USDINR has gradually moved higher from 70.95 levels to 71.08 on the back of short unwinding. Inflows continue to dot the way forward with uncertain timelines. While there doesn’t seem to be any reason for USDINR to move higher another 15p move up could be on account of short unwinding and regular outwards. Broad range for the pair is 71.25-70.80 while for the day 71.15-70.95 could hold, CMP 71.08