On Thursday Mike Pompeo is in New Delhi to discuss greater cooperation in defense. But in an environment where the US is launching trade strikes on countries a meeting with the secretary of state would not come with its own risks which can hurt market sentiments in India. On the other hand US has warned India to not buy the Russian anit aircraft defense system, while Indian officials confirmed that they are going ahead with the deal. This can result in US imposing economic sanctions on India. On the back of this I would think that today and tomorrow might be days when USDINR would be bought in anticipation of a negative US comments on Trade with India.
Equity markets in India look stable after yesterday’s hiccup on a certain FPI regulations which came out in April 2018. USDINR 1m NDF is trading 9p right as compared to 8p right yesterday. EM currencies have registered mild depreciation since today morning. FII flows are not very encouraging for the Rupee while Brent above 78 levels will give confidence to USDINR longs. India 10y Yields are at 8% indicating spreading effects of INR depreciation. All this along with Mike Pompeo’s New Delhi visit on Thursday should keep the pair well bid. RBI allowed INR to depreciate yesterday during the Indian session which shows comfort with a gradually depreciating Rupee. Medium term range now shifts to 71.20-72 provided we don’t close below 71.15 today. CMP 71.26, Range 71.20-71.55.
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