Dollar gets respite as virus surge, Georgia runoffs curb risk sentiment

Abhishek Goenka IFA Global

The UK has issued stay at home orders for citizens as it goes into a lockdown which is expected to last until mid-February. The UK has seen more than 50000 cases a day for 7 straight days which has prompted these new restrictions. The Sterling fell about 150 pips overnight from close to 1.37.

The Georgia Senate runoffs are to happen today. Markets will keep a close eye on the outcome. If Democrats win both seats, they would effectively gain control of the Senate too and that would be negative for the US Dollar and positive for risk assets in general.

Nationalized banks supported USD/INR around 72.90 yesterday. One of the side effects of RBI managing FX, Rates and Liquidity is the extreme dislocation we are seeing in the forwards today. While 1y T-bill is at 3.45%, 1y forward is at 4.60%. Carry to Vol is extremely attractive at this point. However, whenever the 3m Carry to Vol has risen to such an extent in the past, we have seen a bout of Rupee weakness.

Rupee to trade in a 72.90-73.25 range. The Rupee appreciated yesterday for the seventh straight session. SGX is indicating a 30-40pt cut for Nifty at open on account of weak overnight global cues. (Dow fell by 1.25%). Germany November retail sales and US ISM manufacturing PMI data due today.

Strategy: Exporters are advised to cover a part of their exposure on upticks to 73.80-73.90. Importers are advised to cover on dips to 73.40-73.50. The 3M range for USDINR is 73.00 – 75.40 and the 6M range is 73.00 – 76.00.

Author

Abhishek Goenka

IFA Global

Mr. Abhishek Goenka is the Founder and CEO of IFA Global. He pilots the IFA Global strategic direction with a focus on relentlessly improving the existing offerings while constantly searching for the next generation of business excellence.

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