INR opens weaker at 71.80 as against yesterday’s close of 71.66 and see some amount of further weakness right up to 72 levels.
The whole mood changed overnight after Trump announced that the deal with China may have to wait until 2020 presidential elections. US house of Rep also passed a bill to counter what it calls “ arbitrary detention, torture and harassment” of Uighur Muslims in China and this may be the latest thorn in the ongoing discussion between the two countries. Surprisingly FX markets have been relatively calmer after the Trump announcement and main reaction has been seen in equities and commodities.
The most Asian equities are trading with a loss of 1 to 1.5%. CNY is trading at 7.06 as against yesterday’s level of 7.04
Locally we believe RBI may cut interest rates by 0.25% on Friday and it may intervene If INR weakens beyond 72.20 to 72.25 levels
We suggest to hedge small exports around 72.20 levels and hedge near term imports around 71.50-71.60