The dynamics for INR is making long USD speculators turn even more bold and this means that INR has more weakness to come by. Policy makers statement shoed that they are OK with weakness and we sense that there may not be any policy intervention.
We are now seeing some panic amongst importers and this remind us of 2013 movement when INR moved sharply from 54 to 68 – again a pre election year. Although that time, country’s finances were much worse that what they are now.
Going forward, levels of 72 is not ruled out.
On Tuesday, India’s trade data was released which shot the five year high at USD 18.02 Bn in July 18 as vs. previou of USD 16.86Bn in June 18. Under performimg exports and continued growing demand in oil, gold and electronic were the key reason. The short fall in trade will add pressure on India’s current account deficit and keen INR weak.
No respite in Turkey- US standoff. Turkey Central Bank took some steps to cool off market. We think, lot more things would happen as corporate default starts in Turkey.
The good development is that Chinese delegation is stated to visit US to start discussion to Improve economic relations.
Indian govt statement on INR weakness indicates that they are not worried and hence don’t expect much policy reaction.
This morning most of Asian currencies and equities are weak.