USD/INR fell below 94.00 for the first time since April, supported by a sharp increase in portfolio inflows into FAR-eligible bonds and equities alongside Brent crude prices dropping below $90/b.
USD/INR has broken below 94.00 for the first time since April as Brent crude's drop below $90/b improves India's terms of trade and is accompanied by a sharp improvement in portfolio inflows into FAR-eligible bonds and equities. These flow and oil tailwinds argue for a stronger rupee, i.e. a lower USD/INR, in the coming days to weeks.
Brent's decline below $90/b is cited as a done fact that supports India's terms of trade and the rupee, but the article offers no forward view on oil prices themselves; it even stresses the rupee move has more to do with the stock rebound than the energy slump. No directional catalyst for Brent price emerges.
The USD/INR pair has dropped below 94.00 for the first time since April, driven by a combination of improved portfolio inflows and favorable terms of trade. Societe Generale analysts note that while Brent crude trading below $90/b provides a tailwind, the currency's strength is significantly bolstered by a rebound in equity and bond markets.
Two factors are pushing the rupee higher: Brent crude falling below $90 per barrel improves India's terms of trade, and portfolio inflows into FAR-eligible bonds and equities have sharply improved.
The analysis points to continued support from cheap oil and strong flows, but it also notes the move is partly tied to the rebound in stocks, so it could fade if those drivers reverse.