Rupee To Multi-Week Highs

The first part of trading today has been good for the rupee. USD/INR is down 0.45% versus yesterday's closing levels. The pair now sits back just under 79.20. Early August levels were just below 79.00, while beyond that is the low from August 2, which came in close to 78.50.

• The rupee is outperforming the rest of the Asia FX complex. Data from yesterday, which showed weaker than expected IP growth, but higher than expected inflation hasn't impact sentiment a great deal.
• Indian bond yields still track lower, with the 10yr last at 7.10%, not too far above recent lows. Onshore Indian bonds are outperforming US trends, with potential index inclusion in major global bond indices a supporting factor in terms of driving fresh inflows.
• We still expect the RBI to replenish FX reserves on a sustained improvement in the capital flow/current account picture. This should see USD/INR bottom out at some stage, (note the 100 MA comes in at 78.53), although the authorities are likely relieved to a degree that the pair has moved away from the 80.00 handle for now.