Spot INR Re-Opens Firmer

Spot USD/INR has re-opened lower, after onshore markets were closed for the first 2 days of this week. We are around 0.40% below closing levels from last week, currently sitting just above 79.30. Since onshore markets closed on Friday, the DXY is higher and we had a strong USD/CNH bounce at the start of the week, so the rupee strength has outperformed those trends to a degree. To a large extent the spot moves were flagged by resilient INR FX NDF performance through yesterday's session. The 1 month USD/INR NDF got to a low of 79.35, but we have tracked higher in early trade today, back to 79.55.

• INR support has come from continued equity market gains, with onshore equities up slightly in early trade today. Gains are fairly modest on a session-by-session basis, but we have only had 1 down session for local equities in August to date. The NIFTY is up around 3% so far month to date, building on the 8.7% gains from last month. Lower crude prices are likely helping sentiment.
• This should keep portfolio equity inflow momentum positive from offshore investors, all else equal. This can in turn provide some marginal support to INR from a BoP standpoint.
• Onshore yields are tracking lower, the 10yr is down around 8bps in early trade to 7.20%. Note the 10yr got close to 7.10% prior to the RBI's rate rise earlier this month.
• To recap, yesterday we had the wholesale prices come in slightly stronger than expected, at 13.93% YoY, versus 13.70% YoY expected. It was still a down step from the prior month's +15.18% YoY rise.