USD/INR Back Close To Resistance Point Above 82.40

Yesterday's lows near 82.00 proved fleeting for USD/INR. The pair closed back at 82.36, while spot has maintained an 82.30 handle since today’s open. The suggests some pent-up USD demand, although we haven't test recent highs above 82.40 yet.

• In NEER terms, INR has underperformed modestly since the start of the week, with the J.P. Morgan estimate down around 0.25% over this period. The index remains above recent lows though.
• CNH/INR is back sub 11.40, although we remain a little 1% above late September lows sub 11.30.
• The focus is likely to remain on intervention efforts, particularly as just above the 82.40 level has represented somewhat of a line in the sand in recent weeks.
• Spot reserves have been steady over this period, but the last official print was only up until the 7th of October. More intervention, reportedly, has been taking place in the forward space over recent weeks. This has seen spill over into lower forward premiums for the rupee, which makes it less attractive to hold the currency from a carry standpoint.
• Although arguably this is not a key driver of FX weakness, rather the negative terms of trade backdrop remains the key headwind. The Citi proxy for INR's ToT is trending higher but from very depressed levels.