Dollar hovers near 2-1/2 low as traders eye US stimulus talks

Abhishek Goenka IFA Global

Global risk sentiment continues to remain upbeat with Dow, S&P and NASDAQ hitting new record highs. Record low real rates across the globe is causing the huge amounts of liquidity infused by central banks to chase riskier assets.

Safe haven assets such as the US treasuries, DXY and the Yen are underperforming. Fed chair Powell in his testimony to the Senate Banking Committee said the US economy continues to remain in a 'damaged and uncertain state' despite progress on the vaccine front. Reluctance to read anything at all into the recent recovery suggests that the Fed is likely to remain in ultra dovish mode for the foreseeable future.

On the domestic front, Cash USD inflows related to MSCI index rebalancing along with aggressive selling by foreign custodian banks caused the Rupee to strengthen.

Nationalized banks who had been supporting USDINR were missing in action for most part of the session, causing a brisk move lower to 73.44. Nationalized banks stepped in towards the end of session to get USDINR to close at 73.66. We may see outflows related to MSCI index rebalancing today. The reaction function of the central bank will be interesting to see. We expect the Rupee to trade between 73.35-73.70 range.

Strategy: Exporters are advised to build long term exposure in 74.60-75.50 range. Importers are advised to cover through options. The 3M range for USDINR is 73.00 – 75.40 and the 6M range is 73.00 – 76.00.

Download The Full Daily Currency Insight

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.

GBP/USD holds range below mid-1.3600s amid Fed risks and Iran tensions

The GBP/USD pair extends its sideways consolidative price move for the second straight day, and trades around the 1.3630 area during the Asian session. The US Dollar is looking to build on its modest recovery from the lowest level since May 14, and is acting as a headwind for the currency pair. The lack of follow-through selling warrants some caution for bearish traders.

EUR/USD gains support amid hawkish ECB expectations, subdued US Dollar

EUR/USD inches higher after posting minor losses in the previous day, trading around 1.1670 during the Asian hours. The pair finds support as rising oil prices, elevated bond yields, and escalating Middle East tensions drive Eurozone inflation concerns. These factors have boosted expectations for a more hawkish stance from the European Central Bank, which is widely anticipated to deliver a 25-basis-point rate hike in September.

$4700 tested as Gold pulls back but bullish potential remains intact

Gold has pulled back sharply from fresh 15-week highs of $4,697, snapping a two-day uptrend in Asia on Tuesday. The US Dollar (USD) holds onto recovery gains, capping further upside in the bullion.

Bitcoin tops $80,000 as US Treasury fights high yields – AERO, VIRTUAL rally

Bitcoin extends gains above $80,000 as broader market risk-on sentiment persists. The scarce asset could extend its rally as the US Treasury combats high yields in the long-dated bond market, with further interventions on the horizon. Aerodrome Finance (AERO) and Virtuals Protocol (VIRTUAL) emerged as top performers over the last 24 hours.

The forex market is switching to a ‘debasement trade’

The US dollar has stabilised near three-month lows thanks to a rapid recovery in Treasury bond yields. Yields on 30-year bonds are returning to the levels seen following the Treasury’s announcement that it was increasing the minimum purchase volume to $4 billion. The greenback got support from falling stock indices, the continued rally in Brent crude, and positive signals from the US economy.

$20 billion offered, $2 billion taken: Why Treasury doubled its buyback cap

The US Treasury moved off its own calendar on Wednesday, and that is the part worth sitting with. At 12:32 GMT, the department said it would at least double the size of liquidity support buyback operations in the 10-year to 20-year and 20-year to 30-year sectors, lifting the maximum from $2 billion per operation to at least $4 billion, effective September 9 and running to November 4.