Monday, September 12, 2011

Morning + Dollar Index

Monday morning shows the SGX at 4962 (at 7.51 AM). If this is how the market opens, then we will open almost 80 points lower. The CNX-IT index may outperform while the Banks could lead lower. After a gap open, a day trade probably comes only out of an intra day consolidation.

On the impact of a rally in the Dollar Index, Tarique Anwar says" The net effect has to be negative equities. Some amount of rally could be digested, but a massive rally, means there is very high risk aversion in global players. In that case every stock market in the world should be selling off. Every dollar peak has corresponded to a bottom in Nifty"

I think the key term used is Risk Aversion. Perhaps, Gold and Silver will also benefit from a risk off trade.

One way to trade the Dollar Index is to buy the USD and sell the Euro. Almost 65% of the weightage in the Dollar Index comes from the Euro. In India, the trader can buy Rupee-USD contract and sell the Rupee-Euro contract. This cancels out the rupee and creates a synthetic Long Dollar Short Euro position. I hope I have got the arithmetic right.

Pi suggests that commodity importers should benefit inspite of Rupee depreciation since commodity prices may fall much more than the depreciaiton. This is a reasonable proposition. Bulk imports come in Coal, Fertilisers, Crude.



rocky said...

respected sir,

thanks for reply
I was reading your blog and you mentioned that you booked at Range Expansion. this move may be more higher so that one can hold to enjoy the trend.How can one identify the Range Expansion can you ellaborate.. if possible give example,chart also

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