INR was, by a distance, one of the poorest....>

INDIA: INR was, by a distance, one of the poorest performers across Asia-Pac FX

Tuesday, boosting USD/INR to the best levels since mid-September and showing

above 71.50. Having gapped lower at Monday's open (presumably on China/US trade

optimism), USD/INR reversed course over the past few sessions as CPI came in

well above expectations Monday (revisions were also positive) and sees inflation

rising at the fastest pace since mid-2018 at 3.99%. The Indian sovereign curve

has steepened - although domestic strategists have warned that higher inflation

is likely to support Indian yields in the coming months, which could limit any

INR weakness.

- Short-end INR vols have generally fallen alongside the INR as lower realised

vols feed through. Nonetheless, INR hedging markets look healthy, with options

volumes holding up well thanks to a $120mln 72.10 three-month straddle crossing

in London hours today.

- Focus turns to Indian trade balance data due at some point today which, back

in August, showed both imports and exports dropping sharply.