Buy US$INR; target of 68.45 - 68.65: ICICI Direct

Government bonds ended higher, ahead of the monetary policy  committee’s two-day review meet, amid widespread expectations that  the central bank will cut the rate  • The benchmark 6.97% bond maturing in 2026 ended at | 105.44 against  | 105.25 the previous day  • The benchmark 6.97% 2026 bond yield fell to 6.22% from 6.24% in the  previous day.  

The rupee was little changed against the dollar, as traders remained  cautious ahead of the  monetary policy review. Strength in major  currencies vs. US$ is helping developing market currencies limit losses  • US$ witnessed profit booking due to strength in euro. The dollar index  fell 0.67% as a recovery in euro post Italian constitutional reforms  referendum supported a recovery. Traders remain wary of recent a surge  in US$ ahead of the upcoming ECB meet where participants would look  for a signal on the asset purchase programme.

In the currency futures market, the most traded dollar-rupee December  contract on the NSE ended at 68. 34. The December contract open  interest fell 1.48% from the previous day  • January contract open interest rose 10.77% from the previous day  • We expect the US$ to gain support at lower levels. Utilise downsides in  the dollar to go long on the US$INR pair.