Today, INR opens at 71.84, slightly weaker compared to Monday’s closing. We believe that for sometime INR may trade in range of 71.40 to 72.0 with bias for 71.40. Overall the risk sentiment seems to be improving and is indicated by indicators like US 10 year yield increased from 1.4% to now almost at 1.75%, gold below USD 1500, JPY above 107. On the news front, China has increased limits on FII investment into local bonds and equities, indicating it is opening to overseas investment. Even Trump seems to be softening his stance, as indicated by firing of John Bolton, NSA who was quite hawkish and was prime mover of hawkish stand against Iran, China and N Korea.
In Asia, CNY is looking stable and is steadily moving towards 7.10 and hopefully below that. On liquidity front, we expect global liquidity to improve after PBOC rate cut, expected stimulus ECB and rate cut from US Fed.
In the medium term, US -China issues are far from over and concrete decisions are missing.
As a strategy, we suggest to hedge long term exports around 72 and also book profits or utilize it soon. Import hedge could be done around 71.40