Diary Of A Trader: Market Expert Gopikrishnan MS Highlights Lucrative USD/INR Trade

BY Benzinga | ECONOMIC | 08/09/22 09:04 AM EDT

With the U.S. set to release its consumer price index data on Wednesday, Gopikrishnan MS, former head of trading for South Asia at Standard Chartered Bank, tells Benzinga readers how to effectively trade the USD/INR forex pair.

Source: Trading View

The Trade: U.S. data, such as PMI and NFP, have been surprising on the higher side in the last few weeks and that has led to strength in the dollar index. In this background, the CPI release is going to be crucial and could induce further volatility in global forex markets, the market expert said. "I have been running long positions on USD/INR August futures from the 78.95 level and would continue to run it through the CPI release."

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Stop Loss/Exit Plan: INR has outperformed other currencies in the mayhem since the break of the war and it will continue to do so, in his view. Factors like the Reserve Bank of India's (RBI) 50 bps rate hike, its relatively more hawkish tone, and foreign investors coming back into Indian equities should stop a steep fall in the INR.

"So, I am running my long position with a target of 80.60 with a tight stop of 79.30," the ace trader said. At present, the USD/INR August futures are trading at 79.7325, according to Monday's close. The Indian currency market remains closed for Tuesday.

Trade Logic: INR has become vulnerable recently due to a larger-than-expected trade deficit of $31 billion during the month of July.

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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