Currency Market 11-Feb: US dollar near 4 month high!

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.