The recent pullback in oil prices has.........>

INDIA: The recent pullback in oil prices has helped the Indian rupee recover

some of its losses against the dollar and a period of range trading between the

May 23 high of 68.45 and the May 28 low of 67.28 looks likely. 

- The rupee has also recovered some lost ground relative to the rest of the EM

FX complex thanks to the boost in its terms of trade. The relatively low level

of foreign ownership of Indian bonds also means that global credit stresses tend

to weigh less heavily on the INR compared to most other emerging market

currencies. 

- INR strength over the past week has come in spite of the drop in 10-year bond

yields, which have pushed back below support-turned-resistance at 7.80% and

currently sit at 7.73%. India-US 10-year yield spreads remain close to 18-month

highs at 490bps and suggest that, barring an upside reversal in oil prices,

Indian bonds look attractive.