No QE, no dollar depreciation

The Euro ready to give way from 1.27 levels to 1.26 levels, it is unlikely that the Dollar would get brow beaten and the Dollar Index rising would mean the Rupee continues to settle to new final lows as no fresh probability to assuage the larger revenue deficits in India is seen. However, in a few days our imports will actually start getting cheaper and impacting a lower core inflation. When that will translate into CPI inflation improvements or actual action on the Diesel and Fertiliser subsidy programs is anyone’s guess. The currency is unlikely to benefit from small fills / corrections on the Fertiliser policy. Yields in the fixed income market run north to 8.22% levels too meaning more room for the Dollar to take up

Aviation stocks were back for a fleeting moment when the up trend was in acton Monday, but a Dollar depreciation seems to have put out prospects on them in these uncertain policy times. India specific political reasons like NDA have largely become dried up wallflowers but a hope of Manmohan Singh getting FM portfolio being dashed might still mean more pain for the Rupee. Of course with a majority of the GDP benefitted by the Rupee the stock market might start seeing the Depreciation ride as more fun than pain.

Dollar remains a safe haven and Treasuries continue to surge south on yields.

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