Strength across Asian FX should provide.......>

INDIA: Strength across Asian FX should provide some short-term support to the

Indian rupee following recent weakness. USDINR has rallied 4% this year, with

the bulk of that coming in the past three weeks as the rupee has been hard hit

by rising oil prices, rising U.S. bond yields, and the threat of U.S.

protectionist trade measures against Indian exports.

- The RBI has continued to accumulate reserves throughout the INR selloff, with

the total reserve stock now at US$424bn, suggesting that the weakness has not

been fundamentally driven but rather driven by the RBI's desire to keep the

currency weak.

- With INR's real effective exchange rate having fallen to a 2-year low, down

~9% from its 2017 peak, the RBI no longer needs to keep the currency weak to

maintain export competitiveness.

- Asian FX has seen strength in recent trading, with the PHP benefitting from

S&P raising Philippines's sovereign outlook to positive from stable and BI

announcing new measures to support the Indonesian rupiah. Some respite appears

to be in store for the INR too, given how beaten down the currency has become.