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Analysts at Westpac are recommending to go long on the 1M USD/INR NDF outright at the current market price of 70.20 for the target price of 72.43, while maintaining a stop loss of 69.24.

Key Quotes

“Rationale:

“The recent downward move in USD/INR appears to have associated more with oil prices than overall risk sentiment.”

“The Putin/MBS meeting at the sidelines of G20 points to a higher possibility of an oil production cut.”

“Oil prices impact both India’s fiscal and current account positions; Using FY18 as a reference point, a USD10 increase in oil prices translates into a USD13bn deduction in a year from the current account via trade (not taking into account remittances), which is significant compared with the annual C/A deficit at around USD50bn.”

“Risks:

  • Risk sentiment supports high yielders in Asia
  • Final oil production cut decision
  • Market perception of a dovish Fed”