Today is the last day of RBI's financial year. If the theory linking RBI's FX purchases to the new economic capital framework is true, we may see the RBI step off the gas going forward as far as Dollar buying is concerned. The Rupee may align with the global Dollar more closely.
The PM is going to address the nation today at 4pm. The address would most likely be centered around unlock 2.0 but there is a chance he may outline India's stance on recent Indo-China tensions. We expect a sideways, flow driven session in the Rupee ahead of the address.
The German parliament has backed ECB's bond buying and is likely to accept is at as being "proportionate", thereby fulfilling the criteria of the German constitutional court and letting the Bundesbank continue participating in ECBs asset purchases. This is a positive development for the Euro.
The RBI yesterday announced a special OMO (Operation Twist) of Rs 10000cr. The RBI would sell T-bills and buy longer dated securities. This would help the market absorb the duration supply and reduce the term premium. USDINR pair is likely to trade in 75.30-75.60 range.
Strategy: Exporters have been advised to cover on every uptick. Break of 75.40 level will be crucial as it may initiate a fresh downside move. Importers have been advised to cover partially at spot levels. The 3M range for USDINR is 74.50 - 77.50 and the 6M range is 74.00 – 80.00.
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