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Higher US Treasuries weigh on EM currencies - HDFC Securities

Indian rupee expected to start left following overnight strength in dollar index and higher crude oil prices. Higher U.S. yields have started to undermine emerging market currencies, which had attracted investors’ funds escaping rock-bottom bond returns in the United States.

Spot USDINR closed at 73.26 gained 23 paise or 0.31% on Monday. Technically, it has resistance at 73.50 and 73.80 while 73 remains support. The bias may turn bullish once the level of 73.50 crosses.

Dollar index expected to trade with positive bias following rise in bond yields. Ten-year Treasury yields climbed to just under 1.6% and equivalent real yields also rose. Brent crude briefly traded near $70 a barrel before pulling back. Asian stocks looked poised for a muted open after a rotation out of growth stocks drove the Nasdaq 100 Index into a technical correction.

US Senate clears stimulus package for US$1.9 trillion which sends bond yields higher on expectation of rise in inflation.

A gauge of the dollar fluctuated near session highs, rising along with equities, which climbed even as US Treasury yields remained elevated. The yen fell to nine-month low and underperformed all of its Group-of-10 peers as currency traders took their cues from buoyant global equities. MSCI’s emerging market currency index dropped to a three-month low after a fall of 0.82% on Monday, the biggest fall in about a year.

The Federal Reserve will release its fresh projections when it will conclude its two-day policy meeting on March 17.

Technical Observations:

USDINR

USDINR March futures formed “Doji candlestick” pattern indicates indecisiveness among traders.

The pair closed above short term moving average and has resistance at 73.61.

Momentum oscillators heading higher suggesting positive momentum.

Volumes remained above averages while price remains stable.

The bullish momentum may pick up once the level of 73.61 crosses in USDINR March futures while on downside 72.80 act as strong support.

USDINR March Daily Chart

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