India has decided to curb the import of “non-essential items” and take further measures to boost exports as New Delhi seeks to reduce its widening current account deficit and shore up its rapidly depreciating currency.
INR was supported via FPI’s on Friday after catching a tailwind from CBT’s aggressive rate hike and oil prices coming off Thursday boil this has marginally improved sentiment. This weekend’s measures will be viewed in a positive light and should keep Friday momentum going, but twin deficit currencies will remain in the market crosshairs.
Its intervention redux 2013 all over again so a good bit of this is priced in, And while Indias Macro picture is considerably more improved since then, but does it matter with the persistent threat of EM contagion wearing on investors? Not to mention higher US yields and the possibility of Oil prices surging after the US Iran sanctions are enforced.
But the overall feeling Im getting from the street is that provided the Rupee stays below 74 there will be no immediate concerns about servicing the debt. But the problem with that level is it does offer a target for the EM bears to focus on
Im still concerned about EM contagion but at his stage, the sell-off remains idiosyncratic mainly, but we could see USD buyers on kneejerk USDINR dip on Monday INR open as sentiment remains incredibly sour.
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Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.