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INR Snaps Winning Streak

INDIA

The rupee declined yesterday for the first time in five sessions, pressured by stock outflows and touted profit taking after USD/INR declined some 1.9% in August, the move was exacerbated by rumoured RBI USD buying. The move lower in USD/INR could be running out of steam, implied volatility has been declining, 6-month implied volatility dropping to the lowest level since February 2020, while 1-Year forward points have narrowed to around 314bps, the 300bps level has in the past been a threshold for slowing INR gains.

  • Meanwhile bonds could find support today, tracking a move in US tsys and as oil continues its decline. Oil is under pressure after Russian oil min Novak said the country could raise oil output above the OPEC+. The OPEC+ group agreed to go ahead with the planned 400k bpd increase scheduled for October, wagering that the spread of the delta variant won't derail demand.

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