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INR: S&P Ratings Outlook Upgrade Provides Limited Support to Rupee

INR
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  • USDINR stands a moderate 0.2% in the green, with the outlook upgrade by S&P providing only a moderate and temporary downtick for the pair. This week’s sustained recovery places the pair 0.35% above Friday’s lows overall, and back above the 50-, 100- and 200-DMAs.
  • The broader recovery in the USD index and risk-off tone across global markets is likely aiding the move higher as attention turns to the announcement of the results from the ongoing elections in India on June 4, with some analysts expecting the rupee to strengthen should the incumbent BJP return to power with a similar majority. Note that the ban in place on exit polls is effective until June 1.
  • While the S&P ratings outlook upgrade had limited impact on USDINR, yields on local bonds sit 0-1bps lower across the curve, with the ratings agency pointing to “India's robust economic expansion” as having a positive impact on its credit metrics, and highlighting its expectations that “sound economic fundamentals” will underpin growth momentum in the next 2-3 years.
  • Data-wise, GDP figures for Q1 are on the docket on Friday, where growth is likely to slow sharply from the 8.4% y/y rate recorded in the fourth quarter of last year (Est: +7.0% y/y).
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  • USDINR stands a moderate 0.2% in the green, with the outlook upgrade by S&P providing only a moderate and temporary downtick for the pair. This week’s sustained recovery places the pair 0.35% above Friday’s lows overall, and back above the 50-, 100- and 200-DMAs.
  • The broader recovery in the USD index and risk-off tone across global markets is likely aiding the move higher as attention turns to the announcement of the results from the ongoing elections in India on June 4, with some analysts expecting the rupee to strengthen should the incumbent BJP return to power with a similar majority. Note that the ban in place on exit polls is effective until June 1.
  • While the S&P ratings outlook upgrade had limited impact on USDINR, yields on local bonds sit 0-1bps lower across the curve, with the ratings agency pointing to “India's robust economic expansion” as having a positive impact on its credit metrics, and highlighting its expectations that “sound economic fundamentals” will underpin growth momentum in the next 2-3 years.
  • Data-wise, GDP figures for Q1 are on the docket on Friday, where growth is likely to slow sharply from the 8.4% y/y rate recorded in the fourth quarter of last year (Est: +7.0% y/y).