US Fed's balance sheet hits new record high

Abhishek Goenka IFA Global

Overall sentiment prevailing globally can be best described as one of cautious optimism. With a couple of vaccines having been proven effective in trials, the question now is how much the situation gets worse before it becomes better and how much more damage is inflicted upon the economy until then.

This week, the focus remains on the FOMC minutes. Markets would look for cues from the FOMC minutes regarding possibilities whether the Fed would extend the timeline of its asset purchases in Dec policy. On the domestic front, FPI Inflows into equities are likely to continue this week. Also, MSCI index rebalancing later this week is likely to result in passive flows to the extent of USD 2.5bn.

With these flows, November would surpass August to witness the highest ever FPI inflows into equities. Month-end exporter selling is also likely to cap up side in USD/INR this week. If the broader Dollar does not weaken further, we expect the RBI to mop up inflows this week and therefore a rapid move lower in USD/INR too is unlikely. For the day, we expect the Rupee to trade in a range between 73.95-74.30 range.

Importers are advised to cover on dips to 73.80-73.90. Exporters are advised to hedge through risk reversals to retain participation on the upside.

Strategy: Exporters are advised to cover around 74.30 level. Importers have been advised to cover through Option strategy. The 3M range for USDINR is 72.50 - 74.50 and the 6M range is 72.50 – 75.40.

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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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