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INR: Goldman Sachs Continue to Recommend EUR/INR Shorts

INR
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  • Goldman Sachs note that the INR continues to stand out within the EM FX complex for its elevated carry-to-vol ratio, with carry attractiveness boosted even further when paired with EUR or CNH shorts. They expect this to remain the case as the RBI maintains a patient rate policy stance and a tight management of FX volatility.
  • With the trade-weighted INR tracking closely the trade-weighted USD and the INR’s global betas below historical averages, Goldman Sachs see the Rupee as a key component of any EM FX carry strategy and therefore continue to recommend EUR/INR shorts.
  • In terms of valuations, Goldman Sachs find that the INR is modestly undervalued versus the USD across different approaches, but think this is mostly a reflection of the Dollar’s overvaluation signal, rather than an India specific premium.
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  • Goldman Sachs note that the INR continues to stand out within the EM FX complex for its elevated carry-to-vol ratio, with carry attractiveness boosted even further when paired with EUR or CNH shorts. They expect this to remain the case as the RBI maintains a patient rate policy stance and a tight management of FX volatility.
  • With the trade-weighted INR tracking closely the trade-weighted USD and the INR’s global betas below historical averages, Goldman Sachs see the Rupee as a key component of any EM FX carry strategy and therefore continue to recommend EUR/INR shorts.
  • In terms of valuations, Goldman Sachs find that the INR is modestly undervalued versus the USD across different approaches, but think this is mostly a reflection of the Dollar’s overvaluation signal, rather than an India specific premium.