INR opens 70.99 as against yesterday close of 71.40 and now 70.91. Overnight, easing of tension between US and China changed the scenario and today all currencies and equities are strong. It was quote surprising that Trump gave so easily into China and agreed to defer the increased tariff till Dec 15. The two countries also agreed to resume talks in two weeks. Hopefully, for next two weeks, Trump may not change the stance and global markets may be normal; CNY may move below 7.0 and INR may trade below 70.80
Acc to us, one of the possible factors of de-escalation could be Aramco IPO (scheduled in Q1 20). Saudi may have asked US to help and de escalate or else IPO may not find investors. We felt this because in second half of yesterday crude had started rising (with no reason and Eu equities were still down) and Saudi would want to pump up crude prices to make IPO success. Lot of bigger political things are beyond comprehension.
For now, we still believe that long term export hedging could be restarted be restarted around 70.90-71.00 levels.