Global risk sentiment is holding up. The Dow ended the session flat yesterday. The Dollar continues to remain under pressure and has weakened overnight as short term rates remain anchored and higher inflation expectations keep US real rates under pressure.

The Euro has followed up on post NFP rebound, breaching 1.21 and the Sterling too is threatening to break the upper end of its recent trading range of 1.3850. A move towards 1.42 on the Sterling looks possible.

Onshore the tight intraday trading ranges in Rupee continue. The forward curve has been majorly compromised on account of the RBI trying to manage to juggle multiple objectives. The 1y forward yield yesterday touched 5.13% as the RBI continues to buy Dollars in spot and push the purchases forward.

We expect the Rupee to open around 72.85 and trade a 72.80-73.00 range intraday. The Nifty reversed intraday yesterday. Domestic bonds had opened weak yesterday on the announcement of an additional Gsec auction to make for the auction that had got cancelled on Friday. Ahead of the Lunar New year holidays, data sets released by China show that factory activity grew at the slowest pace in five months in January, reflecting the outbreak’s impact on production as well as services including logistics and transportation as the country sought to contain COVID-19. 

US Jan CPI is the major data to track today. 

Strategy: Exporters are advised to cover a part of their exposure on upticks to 73.40-73.50. Importers are advised to cover through options. The 3M range for USDINR is 72.50 – 74.40 and the 6M range is 73.00 – 76.00.

 

Dollar

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