USDCNY has been trimming gains from last four days, drop from the highs of 6.5934 to the current 6.5650 (0.43%).
China May activity and loan data should be a mixture of less impressive recovery in sales, continued YoY drop in trade, softening CPI, and slower aggregate financing.
The CNY IRS curve should stay with its current shape with the soft growth outlook counteracting supply risk. The uptrend in USDCNH should stall alongside a weaker USD.
The RBI is expected to keep benchmark rates unchanged on Tuesday. The focus is on liquidity management and if the RBI will stay with its dovish stance on better than normal monsoon expectations.
Our short SGDINR (1m forward) trade recommendation is down post-payrolls, but it is still in positive territory (along with accumulated P&L on previous closed positions), and similar to past months we plan to roll the position (expiry is this week) on favorable relative macro and carry.
As USD/INR bears have resumed, vol-adjusted carry ahead of Fed’s event scheduled mid-June has jumped back to pre-tapering levels. As a result, earn carry through short-term puts, preferably through 2W USD put spreads.
Enter USD/INR put spreads that offer pre-taper tantrum levels of vol-adjusted carry.


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