Headed into the close, INR trades well and....>

INDIA: Headed into the close, INR trades well and is outperforming most others

in Asia-Pac FX. USD/INR gapped lower, falling well through the 71.00 handle to

print as low as 70.8475 Tuesday. Onshore markets were closed Monday for state

elections, leaving Tuesday's trade as a catch-up session and helping boost both

futures and options volumes. Some wires, however, have pointed out that state

banks remain USD buyers (possibly on behalf of the Indian central bank), which

is helping slow USD/INR's decline.

- Capital flow data remains supportive, with data from the tail-end of last week

showing foreign investors remained net buyers of Indian assets. This hasn't been

reflected in equities, however, with both the Sensex and Nifty50 looking to

close with losses.

- USD/INR calls have been better bought so far Tuesday, with call strikes at

72.20 and 72.80 in demand. INR implied vols (particularly short-end) are

retreating, however, with the 1m measure hitting the lowest since early August

at the halfway point today.