Premium trades review: 20 January 2012
USD/INR SPOT:
USD/INR is in bid mode on genuine dollar demand. RBI not yet seen in “buy side”. Higher EUR/USD and 3M FX premium at 8.5% would limit rupee weakness at 50.45-50.60 (considered good to sell April 2012 dollars at 51.60-51.75) while 50.10-49.85 is considered good to buy January 2012 dollars at 50.20-49.95 as hedge against month end demand for dollars. Over all, watch consolidation at 50.10-50.45 with overshoot limited to 49.85-50.60.
USD/INR Premium:
It is good to try two trading strategies. For ALM strategy, it is good to receive 3M premium above 8.5% to fund PCFC book and use the dollars to pay 12M premium below 6%. It is liquidity neutral and considered as yield pick-up strategy. Traders with holding appetite can hold on to Jan/Dec receive strategy at 271-278 with tight stop.
EUR/USD:
Liquidity relief in the Euro zone and resultant “short squeeze” is providing extended “correction” in EUR/USD. At this stage, we cannot rule out extended gains into 1.3075-1.3150 while 1.2875-1.2800 holds firm. Let us buy dips into the said support with stop below 1.2775 for one quick look at higher end of set near term range of 1.2650-1.3150.
No change in view for other asset classes.
Good luck.............Moses Harding
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