Fresh Record Low

Spot USD/INR has pushed to a fresh record high today. We sit close to 79.40, around +0.20% above last week's closing level. The 1 month NDF is also close to fresh record highs north of 79.65.

• BoP pressures persist, with FX reverses falling by just over $5bn in the last week of June. Headline FX reserves have dipped close to $44bn since early March. The rough consensus from last week's announcement around measures to aid capital inflows is that they take time to gain traction.
• RBI board member Bhide stated the RBI may need to raise rates more aggressively to curb inflation pressures. The board member also stated the weaker rupee was limiting pass through of lower commodity prices to domestic inflation pressures. As we have highlighted previously, to date, INR has received very little benefit from lower commodity prices, likely in part due to pent up USD demand.
• RBI Governor Das sounded a little more optimistic over the weekend though, stating inflation pressures are expected to cool from October onwards, and suggesting a soft landing could be engineered.
• Note, the data calendar is busier this week, with IP and CPI figures printing tomorrow, followed by wholesale prices on Thursday. Trade figures are also due Thursday or Friday.