Currencies trading mixed ahead of FOMC decision
US Durable goods data yesterday beat expectations, coming in at 7.3% against expectations of 6.9%. The US Dollar has continued to weaken on account of lower real rates, especially against majors.
USDINR pair is likely to trade in 74.50-74.90 range. Yesterday too the nationalized banks bought into the dip towards 74.60 aggressively.
The RBI yesterday announced a new 10y benchmark to be auctioned coming Friday. This is now the 9th security which would be available to FPIs under the Fully Accessible Route (FAR). As the float under the FAR increases, it increases the likelihood of our bonds getting included in a global bond index. In the scenario of partial inclusion we could be looking at inflows of around ~USD30bn
We may see some sideways action in currencies until the FOMC tomorrow. US real rates need to be followed closely.
Asian currencies are stronger against the USD. The Nifty is facing some resistance around the 11250 mark. Gold continues to hold near record highs.
Strategy: Exporters are advised to cover at lower levels only through option strategy. Importers are advised to hold maintaining a stop loss of 75.00 or cover through risk reversal option strategy. The 3M range for USDINR is 73.60 – 75.90 and the 6M range is 73.00 – 77.00.
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