INR: USDINR Closes Just Shy of All-Time High

USDINR ended the session at 83.5700 on Tuesday, just below the April 19 all-time high of 83.5750. Note Reuters reported recently that the RBI is likely selling dollars at around 83.56, citing traders. Analysts have repeatedly flagged that the central bank is likely to limit rupee downside following the elections.

• Implied vols have continued to settle following a turbulent post-election period, with a familiar cabinet team appointed by Modi pointing to policy continuity within the new coalition government. US CPI data and the Fed interest rate decision tomorrow mark the next key risk events for the rupee.
• The Nifty and Sensex indices ended the day slightly lower but still close to their record highs overall. Both have recorded bounces of ~10% compared to last Tuesday’s lows, with analysts flagging that Indian equity funds attracted the biggest weekly inflows on record as investors bought into the selloff last week.
• Data-wise, domestic CPI figures for May will provide the highlight of the week tomorrow. ING note that with no big swings in any of the important food categories in May, it looks likely that the index will rise by a modest 0.5% m/m, almost unchanged compared to April on a year-on-year basis.