US extends social distancing till April thirty; global risk sentiment negative
|The Coronavirus situation in the US continues to deteriorate. The US has become the epicenter of the pandemic now. US president Trump has decided to extend the social distancing guidelines until April 30th.The US Centre for Disease control has issued a travel advisory for New York, New Jersey and Connecticut.
India Coronavirus cases have crossed the 1000 mark.
The overall risk sentiment is negative. US treasury yields are lower. USD has strengthened across the board. Asian currencies are trading 0.3-1% weak against the US Dollar. Asian equities are trading with cuts of 1.5-2.5%.
Likely range for the USDINR IS 74.85-75.50.
Month end exporter selling and nationalized banks intervening on behalf of the RBI could cap up side in USDINR intraday. Watch out for the spread between April futures and April OTC as there is a handsome arbitrage on offer there. Fitch on Friday downgraded UK to AA-. We could see more such rating downgrades in the near term as government around the globe have doled out massive stimulus packages to tide over the economic fallout of the Virus outbreak.
Strategy: Exporters are advised to hold. Importers are advised to go for back to back hedging or through RR option strategy (Buy Call, Sell Put). The 3M range for USDINR is 73.00 - 77.00 and the 6M range is 72.0 – 78.00 considering the panic situation amid coronavirus spread.
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