The currency markets witnessed a fall in the US Dollars against all the currency majors. This has happened mainly after the US presidential elections, and it is perceived as a trend that may endure for some more time. In terms of investments there has been a gradual rising preference for emerging markets assets as evidenced for the renewed inflows into these markets.
The Yuan has been helped by the smart recovery in the Chinese economy with all the major variables indicating a pick-up in all the major sectors of the economy. Supported by a robust economy the Yuan is likely to test higher levels in the coming two months, till there is more clarity in approach of the new regime in Washington. But it is more or less certain that there may not be any more disruptions to trade and the economy as the new regime would be careful in ensuring that the final agreement with China is done with, though not much of variations is expected in the tariff rates.
While the US recovery may be still a distance away, the US inflation is likely to rise gradually in the coming months. The US 10 Year had already moved dup to 1 % and then it declined to 0.90 %. It looks like there may be some emerging pressures on yields due to rise in prices. The rise in oil prices itself will be a reason for price level pressures. Currencies which may be impacted by rising oil import costs may find their currencies at a disadvantage compared to the US Dollar. The Indian Rupee has been broadly in the range of Rs.73 to Rs.74 in the last two months. This is mainly due to the RBI activities in the currency markets to keep the exchange rate stable. The Rupee may continue to be rangebound in the immediate term.
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