RBI Intervention Continues

Spot USD/INR is down from yesterday's closing levels, back to 78.25 from 78.35/40. The 1 month NDF is also down from recent highs, back to 78.45 from 78.55.

• Softness in commodity prices is helping, while Indian equities are higher in the first part of the trading today (+1.3%).
• RBI intervention is also being cited, with sell-side banks noting the sharp drop in onshore forward premium as evidence of intervention through forwards. The RBI's forward book was just under $64bn at the end of April, so there is ample room on this front.
• India’s current account deficit narrowed to 1.5% of GDP in Q1 of this year, down from 2.6% in Q4 last year. For the full financial year (ending March 2022), the deficit was 1.2%, versus a 0.9% surplus for the previous financial year.
• The sequential improvement from Q4 to Q1 is unlikely to be the start of improving trend though. Historically, we tend to see improvement in the current account position between Q4 and Q1. So that may unwind somewhat in Q2.
• Also note the higher trade deficits in April/May of this year compared to Q1, about $3bn wider on average so far.