Still Underperforming

USD/INR is tracking higher, in line with other UST yield sensitive currencies today. The pair was last at 82.67, with December highs just a touch higher around 82.77. A break above these levels would have the market targeting the high 82.00/low 83.00 region, although this could draw RBI intervention risks. The last RBI policy meeting suggested the central bank was comfortable with the current state of FX markets and signaled a less interventionalist stance. Still, we would be surprised if the RBI stood aside completely and let USD/INR trade to fresh cyclical highs.

• The INR also remains an underperformer on a NEER basis. The index is now 5.8% off late September highs and at fresh cyclical lows (J.P. Morgan Index).
• Oil prices are higher in recent sessions, but INR has not received any benefit from the multi-month pull back in prices, which has pushed the Citi terms of trade proxy up from the late August trough point. Recent trade balance prints are only showing modest improvement from mid-year widens from a deficit standpoint.
• On the data front, tomorrow delivers wholesale prices, 6.30% y/y expected, against 8.39% prior. This comes after yesterday's CPI print, which came in below expectations at 5.88% y/y, 6.35% forecast. This print is aiding bond and equity sentiment today. The 10yr yield is back to 7.28% but hasn't seen follow through beyond 7.25%.