China's CPI up 0.9% year on year in April
|The global sentiment has been dampened with the WHO expressing concern over the new COVID variant. The Dow ended in the red after 6 successive sessions of gains. The tech-heavy Nasdaq shed 2.5% as long-term yields rose amid inflation concerns. The Dollar has strengthened a bit overnight as US yields have firmed up. However, inflation expectations are still extremely elevated and therefore real rates are low. US 10y inflation expectations are now above 2.50%, the highest since 2013.
China's April CPI came in lower than expected but PPI came in higher. Asian equity indices are trading with cuts of around 1-2%. Asian currencies are trading weak against the Dollar
The sentiment onshore is likely to be a bit fragile amid global risk-off. 14450-14500 zone continues to remain very crucial support for the Nifty, a break of which could trigger a major sell-off.
Domestic bonds could be under pressure given higher US yields and mounting concerns over inflation given the rally in commodities. The focus will be on the Rs 12000crs SDL auction today. While near month forwards has retreated, the far end is getting paid.
Strategy: Exporters are advised to cover a part of their near-term exposure on upticks towards 74.00. Importers are advised to cover through forwards on dips towards 73.30. The 3M range for USDINR is 72.50 – 75.50 and the 6M range is 73.00 – 76.50.
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