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Rupee Not Enjoying USD Sell-Off, Services PMI To Print

INR

Spot USD/INR is drifting higher in early trade today (after onshore markets were shut yesterday). We remain well within recent ranges at 81.60/65, but the rupee is not enjoying the benefits of a weaker USD seen elsewhere in the region. Coming up soon is the services (last 57.2) and composite (58.2) PMI readings for September.

  • The recovery in crude prices is likely weighing on INR sentiment, at least on a relative value basis. The chart below plots the 1 month change in the J.P. Morgan INR NEER, which is inverted on the chart, against the 1 month change in the Bloomberg spot energy commodity price index.
  • INR is the only EM Asia FX currency not to gain against the USD so far in October. In September it was the best performer, albeit still dropping 2.2% against the USD.
  • Elsewhere, onshore yields are up, the 10yr pushing back to 7.46%, +10bps, as potential index inclusion has been put off to 2023. Local equities are higher though, +0.60% at this stage.

Fig 1: Energy Commodity Prices & J.P. Morgan NEER

Source: J.P. Morgan/MNI - Market News/Bloomberg

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