People’s Bank of China maintains key rate at 3.7%

People’s Bank of China maintains key rate at 3.7%

Ukraine has rejected Russia’s ultimatum to hand over the city of Mariupol to Russian forces. Although Ukraine is open to negotiations, there does not appear to be an immediate diplomatic solution that would end the conflict which has been going on for almost a month now. The People’s Bank of China left borrowing costs unchanged, keeping the prime lending rate at 3.7%. However, further easing from the People’s Bank of China is expected, including a reduction in the MLF and the reserve requirement ratio.

Price action on assets

The oil price crude have now risen about 8% since our markets closed on Thursday. the Brent is currently trading at 111 USD per barrel. It is up nearly 15% from the sub-$100 lows seen last Wednesday.

While the yen continues to weaken against the US dollar and is trading at its lowest level in 6 years, currencies linked to raw materials are stronger. Aluminum prices rose after Australia banned the export of ore to Russia.

The euro and the pound sterling are stable against the US dollar. US yields are flat with light trading in the Asian session given the Japanese holiday.

The yield on the 10-year fluctuates around 2.15%. U.S. stocks ended higher on Friday, the S&P500 having finished up 1.2%. Asian stock indices are trading flat.

Impact on financial markets in India

Actions

The Nifty finished up 1.8% on Thursday at 17287. We expect the Nifty to trade in a range of 16800-17600 over the next few sessions.

Bonds and Rates

The yield on the benchmark 10-year ended almost flat on Thursday at 6.78%. We could see a sell-off in domestic bonds and OIS today due to rising crude oil prices. The 3-year and 5-year OIS had fallen about 10 basis points last week to end at 5.39% and 5.86% respectively.

USD/INR

The rupiah strengthened on Thursday, following the US dollar’s overall weakness in forex after the Fed’s monetary policy decision. The pair ended last week at 75.80. However, the rupiah weakened in offshore trading on Friday to 76.15 following higher crude prices.

Domestic markets were closed on Friday for a public holiday. ATMF 3-month implied volatility fell to 5.95%. Futures remain under pressure with a 1-year yield at 3.88%.

Strategy

It is suggested that exporters only hedge confirmed positions. For any additional hedge based on expectations, we suggest holding the stop loss at 75.80 until the panic subsides. Importers hedge through options or declines. The 3M range for the USD/INR pair is 74.00-77.00 and the 6M range is 73.80-77.30.

Par Abhishek Goenka, CFA, MBA, IFA Global

Abhishek Goenka is a highly regarded and sought-after speaker at global conferences and actively contributes to discussions and reports for many regulators. He embarked on his entrepreneurial journey at the age of 24 and holds an MBA in finance, a CFA and has undertaken various certified executive programs from Harvard University. He is witty and passionate about management and human psychology.

avatrade war

The opinions expressed here are solely those of the author and do not necessarily reflect the views of Forex Quebec. Every investment and trading move involves risk, you should do your own research when making a decision.

Disclaimer: The information and opinions contained in this report are provided for general information only and do not constitute an offer or a solicitation to buy or sell foreign exchange contracts or CFDs. Although the information contained herein is from sources believed to be reliable, the author does not warrant its accuracy or completeness, and assumes no responsibility for any direct, indirect or consequential damages that may result from anyone relies on such information.

Leave a Reply

Your email address will not be published. Required fields are marked *