USD/INR Rupee Recovers to Pre-NFP Record of 60.40

The Indian rupee fell to a record low of 61.21 to a dollar on Monday during the Asian session. The currency recovered during the day as rumours of a Reserve Bank of India USD selling intervention spread. The INR recovered to 60.30 levels during the North American trading session as news of a potential sit down between the Central Bank and large Oil refiners hit the wires. The objective of meeting with refiners is to come up with a solution to reduce “speculative” positions of INR by partnering with companies that have to buy dollars to pay for supplies denominated in USD.

The USD was the strongest currency last week. Gaining against all major pairs across the board. The higher than expected Non farm payroll report on Friday boosted the USD. The final print was 195,000 beating expectations by about 30,000. The healthy employment figured revived fears of an end of quantitative easing first started by Fed Chairman Ben Bernanke two weeks ago when the INR first hit a new all time low.

Emerging markets started on a back foot this Monday but as the day wore on the USD gave some of the gains of the last week. There is a lot of speculation of what the FOMC meetings the Fed held on June 18/19 meeting that will be disclosed this coming Thursday. After Bernanke’s original comments came out there was a slew of Fed members that tried to “clarify” and criticize the increase in volatility that resulted from the statement. The upcoming minutes could have the power to disrupt the market again if they disclose contracting information inside the US Federal Reserve.

The USD/INR will be subject for further volatility this week. Political unrest in Portugal and Egypt have not impacted the market that much this week, but they have the potential to trigger a risk adverse movement. A positive NFP has put the end of QE well in sight. Further details from the FOMC minutes could strengthen the USD this week to the detriment of emerging markets. The RBI does not have the power to curb the Rupee’s fall, but they are exploring the most cost-effective but closed-market alternatives. The Central Bank has asked oversees funds to justify that their purchases are true hedging transactions on their bid to reduce speculation on the currency.

USD/INR Fundamental Data to be released this week:

• INR M3 Money Supply
• INR Industrial Output (May)
• INR Bank Loan Growth

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