Rupee pressure and dollar strength from war inflation (with Haslinda, Ruth Carson)

States rupee weakness will persist, asks how long strength can last.

Haslinda

Abbas Keshvani

Weakness will persist. RBI clamped speculators but real dollar demand from economy remains. Trade deficit widening from ~$30B to $34-35B/month.

Every day, Indian refiners buy dollars for oil, now paying premiums. Strength likely only couple days as positions unwind by April 10 deadline.

Abbas Keshvani

RBI tools limited as reserve buffer thinned. Shows limitation of protracted dollar selling.

Moving to ancillary tools like position limits.

Asks view on dollar path given protracted war pricing.

Ruth Carson

Abbas Keshvani

War is very inflationary - energy, food, semiconductor inputs (helium, bromine). Market may price more Fed hikes.

Higher US yields mean less demand for risky EM assets. Money leaves EMs for US - suction sound like 2022.

Counters that India is high-growth story.

Haslinda

Abbas Keshvani

Growth not always good for FX. India's growth drives import demand, widening trade deficit, putting depreciation pressure.

During COVID, restrictions reduced imports and India briefly had current account surplus.

Asks fair value and year-end target for rupee.

Haslinda

Abbas Keshvani

Spot was ~1.5 rupees above fair value; speculative pressure now gone. Fair value will keep moving higher as monthly trade deficit continues.

Same story applies to Philippines, Indonesia, Korea, Thailand - Asia is collateral damage, paying premiums for energy.

Asks about FX positioning conversations.

Ruth Carson

Abbas Keshvani

People still want to buy dollar. Speculators shorting high-beta Asian currencies, even yen not safe.

Currencies are easiest way to express views on energy-dependent Asia.