Currency Market Update - 24-Dec : 10 year yield correct 19 bps on Operation Twist

The free fall in cable continued amid fears of hard Brexit. GBP/USD tumbled to near three week low of 1.2904 as lack of volumes accentuated the pain. On the other hand, US dollar index remained broadly unchanged despite weak durable goods orders. Durable goods order declined by 2% on M-o-M basis. Going forward, major currencies is expected to witness a calm session ahead of Christmas.

On domestic front, RBI concluded Operation Twist by buying INR 10,000 Cr 6.45% GS 2029 security at a weighted average yield of 6.5828% and selling various short term papers – INR 6,825 Cr. First, weighted average cut off yield is nearly 16.5 bps lower pre-announcement levels of 6.748%. Second, RBI has net bought INR 3,175 cr worth bonds, it should increase the liquidity in system.

Date	10 year yield	1 Year yield
19-Dec	6.7460%	5.5860%
20-Dec	6.5980%	5.8530%
24-Dec	6.5560%	5.5840%
Change	0.1900%	0.002%

Above table shows that – Short term yield (1 year) had initially spiked to 5.8530% from the pre-announcement level of 5.5860% but finally settled at 5.5840%. So there is almost no change in short term yields due to this operation. On the other hand, 10 year bond yield continued corrected nearly 19 bps from pre-announcement levels. USDINR pair opened the session at 71.22 on a flat note against previous close of 71.1850. USDINR pair has first support at 71.08-71.11 levels and second support at 70.97-71.00 levels. USDINR pair has first resistance at 71.30-71.35 levels. Range for the day seen as 71.10-71.35