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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
INR
Spot USD/INR rose yesterday by over 0.50%, closing at 78.77, comfortably above previous highs. This was the largest daily fall since early May for the rupee. We got close to 78.90, but RBI intervention efforts managed to calm sentiment to a degree. The 1 month NDF sits around 79.20, implying a higher onshore spot open today.
- USD demand was reportedly strong due to chunky futures expiry in USD/INR, according to Bloomberg reports. The unwinding of these positions, which got as highs +$8bn in mid June created spot USD/INR demand.
- RBI has reportedly rolled some of its futures into July ($2bn) to calm depreciation pressures.
- We would expect the RBI to remain quite heavily involved in the FX market. Further sharp rupee depreciation may unsettle onshore confidence, particularly if we breach levels like 79.00.
- A controlled pace of depreciation has kept INR vol and risk reversals fairly benign in recent months, see the chart below. Sharp moves higher in these metrics is only likely to fuel higher USD/INR levels.
Fig 1: USD/INR 1 Month Implied Vol & Risk Reversal Levels
Source: MNI - Market News/Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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