Week in FX Asia – INR Caught In A Perfect Storm

This week saw the Indian Rupee print a new record low against the ‘mighty’ dollar. Currently, India is facing a perfect storm of negative factors. And, in the eye of this storm the Indian Prime Minister, Dr. Singh, has come out swinging in favor of his beleaguered currency, stating that recent government steps is helping to stabilize the economy and by default expects the currency to recover.

India’s beaten-down currency has been battling and has not yet given up the fight. On Thursday, it happened to stage it’s biggest one-day gain in 15-years on central bank intervention. The currency continues to pare its recent losses and is trading sub-67.00 to the dollar as we close out the week.

With policy measures in the realm of “no good options” there remains a market risk that INR could trade back and through the psychological 70 levels. The Emerging Market crisis is affecting countries with “poor” fundamentals and India with its large current account deficit and high inflation is at the top of EM flight of capital list.

It seems that India’s biggest problem is the confused response from policy makers and only a year ahead of a general election. Prime Minister Singh’s comments overnight are helping INR. He points out that the government is taking all the necessary steps to achieve a financial year fiscal deficit of +4.8% of GDP and that the central bank will continue to focus on inflation. The government is not expecting any capital controls to be implemented and expects October-March growth to pick up. Will they be able to follow through? Maybe more record dollar highs are required to get a more forceful response?

• Singapore Dollar Under Threat
• India Rupee Has Biggest 1 Day Gain Still Over 67 USD/INR
• BoJ Member Warns Emerging Markets About Outflows
• India Plans to Buy Gold From Citizens
• China Banks Post Better Than Expected Profits
• Indonesia Central Bank Raises Rate to 7%
• China To Increase Taxes On The Rich
• SGD Expected To Outperform Regional Counterparts
• Lower Non Resident Indians Inflow Hurting India Further
• Indian Business Magnate Believes Weakening Rupee Will Hurt “Whole Economy”
• SE Asia Stocks Falling Fastest Since Dot Com Bubble Burst
• Abe Adviser Says Sales Tax Hike Should be Delayed 1 Year
• Yen Higher on Syrian Risk Aversion Flow
• Kuroda Was Praising Bank of Japan Policies At Jackson Hole
• Japanese Sales Tax Debate Might Trigger More Stimulus
• Japan Debt Costs Will Hit 257 Billion Next Year
• Japan Econ Min: Abe Did Not Instruct on Corporate Tax Cut
• China on track to meet the Government’s 2013 growth target of 7.5%
• Japan Begins Sales Tax Hearing
• Asia’s Dip May Be Worse Than 1997?
• China Reassures Investors Growth Now Stable
• Singapore – U.S. Trade Remains High

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