USD/INR finished the session slightly lower...>

INDIA: USD/INR finished the session slightly lower Wednesday, appearing to

stabilise somewhat following the bounce off multi-month lows yesterday. USD/INR

closed at 68.8300 after printing as high as 69.1675 shortly following the open.

1m implied vols edged back above 6.00 points but still trade at a material

discount to 2- and 3m vols, with those contracts capturing election risk. 

-Despite the bounce since the beginning of the week, many analysts continue to

see the pair falling further in the coming months, with the market further

pricing in a higher likelihood of PM Modi winning a second term at the elections

due to begin on April 11th (final results following just over a month later on

May 19th). Both MUFG and Scotiabank, in notes this week, forecast USD/INR

dropping to 67.00 in three months' time.

-The (still new) governor of the RBI spoke Tuesday on the need for more fiscal

consolidation, comments that follow the RBI cutting rates earlier this year in a

move that some saw as allowing the government to expand fiscal policy further

and put more pressure on deficit targets. This may signal that the RBI will be

less willing to cut rates to support the deficit in the future.