Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

<ul>
<li>The Indian rupee has underperformed because of growth fears from the Omicron variant, RBI staying on hold even as the Fed signaled rate hikes, and outflows from the equity markets.</li>
<li>The growth fears may be overdone and the pressure on the RBI to tighten monetary policy should increase on rising inflation expectations and with the Fed tightening.</li>
<li>Shorting Indonesian rupiah (IDR) against INR makes sense as Bank Indonesia should delay rate hikes due to the weak economic recovery and benign inflation, even if the Fed starts hiking.</li>
</ul>


The Indian rupee has underperformed because of growth fears from the Omicron variant, RBI staying on hold even as the Fed signaled rate hikes, and outflows from the equity markets.
The growth fears may be overdone and the pressure on the RBI to tighten monetary policy should increase on rising inflation expectations and with the Fed tightening.
Shorting Indonesian rupiah (IDR) against INR makes sense as Bank Indonesia should delay rate hikes due to the weak economic recovery and benign inflation, even if the Fed starts hiking.


Alpha Bites: Long Indian Rupee (INR) Vs Short Indonesian Rupiah (IDR)

<ul>
<li>I reiterate the risk that the dollar can strengthen in the near term by being on one of the two ends of the dollar smile, thus weighing on EM currencies.</li>
<li>On the positive side, the dollar strengthening should not last since the currency is already expensive in REER terms. Also, long speculative positions in the dollar are already quite heavy.</li>
<li>Since positions tend to follow dollar moves, whenever the dollar starts weakening, the unwinding of long positions can exacerbate the move, making it a supportive environment for EM currencies.</li>
</ul>


I reiterate the risk that the dollar can strengthen in the near term by being on one of the two ends of the dollar smile, thus weighing on EM currencies.
On the positive side, the dollar strengthening should not last since the currency is already expensive in REER terms. Also, long speculative positions in the dollar are already quite heavy.
Since positions tend to follow dollar moves, whenever the dollar starts weakening, the unwinding of long positions can exacerbate the move, making it a supportive environment for EM currencies.


Speculative Long Dollar Positions Highest Since 2019

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Thomas Schroeder

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Technical Analysis

<ul>
<li>India's bear stance and short from 18,300 has just registered a fresh sell signal near the 17,800 resistance. The bear flag will break lower and test the 16,500/700 target zone.</li>
<li>The bear wedge displays an a-b-c corrective bounce with 17,200 pattern support as the level to  crack.</li>
<li>USD/INR has been a top USD long theme for a major upside breakout and just clearing the 75.50/60 old high resistance.</li>
</ul>


India's bear stance and short from 18,300 has just registered a fresh sell signal near the 17,800 resistance. The bear flag will break lower and test the 16,500/700 target zone.
The bear wedge displays an a-b-c corrective bounce with 17,200 pattern support as the level to  crack.
USD/INR has been a top USD long theme for a major upside breakout and just clearing the 75.50/60 old high resistance.


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Olivier Desbarres

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4X Global Research

4X Global Research was founded in 2017 to provide institutional and corporate clients with the substantive research, high-quality analysis and thoughtful insight on Emerging and G20 economies and financial markets they need to make informed and timely decisions and gain an edge in their investments.

<ul>
<li>Last week's spike in US asset prices, including US Treasuries, in the wake of gangbuster US CPI-inflation data for October, has proved short-lived.  </li>
<li>However, EM currencies have outperformed developed currencies since 1st November thanks partly to EM central bank policy rate hikes, a lack of currency contagion and domestic macro data.</li>
<li>We focus on low-volatility Asian currencies, the under-pressure Norwegian Krone, Polish Zloty,  Hungarian Forint and Euro and the importance of the release of UK retail sales data on Friday.</li>
</ul>


Last week's spike in US asset prices, including US Treasuries, in the wake of gangbuster US CPI-inflation data for October, has proved short-lived.  
However, EM currencies have outperformed developed currencies since 1st November thanks partly to EM central bank policy rate hikes, a lack of currency contagion and domestic macro data.
We focus on low-volatility Asian currencies, the under-pressure Norwegian Krone, Polish Zloty,  Hungarian Forint and Euro and the importance of the release of UK retail sales data on Friday.


FX Round-Up – Calm Before the Next Storm

<p>With the US dollar appreciating on rising risk aversion, it is important to see which EM currencies are more vulnerable and which are less if the dollar strengthening continues. To do so, we look at the systematic risk or beta of each EM currency and how it has evolved. We find that the beta has increased for Central European currencies and Asian currencies with the exception of the Indonesian rupiah and the Indian rupee. It has also increased for the Turkish lira but has dropped for the Mexican peso and the Russian ruble, providing us with a template of which currencies to go long or short.</p><p>Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.</p>

With the US dollar appreciating on rising risk aversion, it is important to see which EM currencies are more vulnerable and which are less if the dollar strengthening continues. To do so, we look at the systematic risk or beta of each EM currency and how it has evolved. We find that the beta has increased for Central European currencies and Asian currencies with the exception of the Indonesian rupiah and the Indian rupee. It has also increased for the Turkish lira but has dropped for the Mexican peso and the Russian ruble, providing us with a template of which currencies to go long or short.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

FX Dashboard: How Have the Sensitivities of EM FX to US Dollar Evolved?

India

The Indian rupee is the official currency of India. 

Price Gauge
52-week Range	0.00 - 0.00
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INR (USDINR CURNCY)

Alpha Bites: Long Indian Rupee (INR) Vs Short Indonesian Rupiah (IDR)

I recommend a Long Indian rupee/Short Indonesian rupiah trade as the monetary policies of the two countries are set to diverge with India raising...

Gautam Jain, PhD, CFA

Speculative Long Dollar Positions Highest Since 2019

Long speculative positions in the dollar are quite heavy implying that whenever the dollar starts weakening, the unwinding of long positions can...

Gautam Jain, PhD, CFA

Nifty Fresh Short Signal

India's bear stance and short from 18,300 has just registered a fresh sell signal near the 17,800 resistance. The bear flag will break lower and...

Thomas Schroeder

FX Round-Up – Calm Before the Next Storm

Interest rate and FX vol has subsided with directionality in EM and developed market currencies driven by domestic macro data and monetary...

Olivier Desbarres

FX Dashboard: How Have the Sensitivities of EM FX to US Dollar Evolved?

We look at the systematic risk or beta of each EM currency to the US dollar and how it has evolved to identify currencies that are more or less...

Gautam Jain, PhD, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)