INR: Pick-up in USD-selling FX intervention? - Nomura

In view of analysts at Nomura, suggest that the recent measures announced by Indian government to stabilise INR were underwhelming.

Key Quotes

“If overall global market conditions remain negative (regardless if driven by rising trade protectionism, a break higher in US yields, Middle East tensions etc.), we believe USD/INR could rise through recent highs (of around 72.915) and trade towards 74.00.”

“That said, the risk of further actions following last weekend’s economic meeting between the prime minister, the finance minister and the central bank governor has risen, especially if INR underperforms/depreciates significantly on an idiosyncratic basis.”

“While the risk of further actions would rise if spot USD/INR continues to test new highs, we see space for the Reserve Bank of India (RBI) to step up its FX USD selling intervention.”

“We estimate there was around USD3.6bn of net selling in August (USD/INR 3.6% higher in the month), which still represents a significant slowdown from the April-June period.