Globally, US
dollar index surged to fresh four month high levels of 98.86 amid strong
payroll number released last week. US non-farm payroll added nearly 225k jobs
against expectations of just 163K. The gains in US dollar were further
supported by rally in US treasuries. US Treasuries fell to 1.56% amid concerns
over Coronavirus. It is interesting that financial markets are preferring to
under-price virus risk rather than over-price. Frankly, it has paid dividend
till now as central banks are ready to step up in event of higher downside risk
from virus. On other hand, GBPUSD is trading near its two month low of 1.2910
levels. Cable will take further cues from UK’s GDP growth numbers, scheduled to
release later during the day.
On domestic
front, G-Sec yield curve seems to have stabilized after rallying significantly
on ‘Long term repo operation’. It is noteworthy that RBI announced INR 1
trillion LTRO operation for 1 and 3 year period at 5.15%. Given, there is no
specific target for these LTRO funds, further gains in yields should be limited
as bond yield might start to catch up with fundamentals. The risk to this view
is fresh round of LTRO operations. On currency front, USDINR pair is trading
near 71.22-23 levels. The pair has
resistance at 71.30 and support at 71.09 levels. Range for day seen as
71.09-71.30.
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