Forex Flash: INR sharp fall in WPI supports more RBI easing – TD Securities

FXstreet.com (London) - Following the release in India’s key inflation reports, Cristian Maggio, Senior Emerging Markets Strategist, Rates and FX Research at TD Securities notes the impact on economic growth is not there yet to support rupee valuations. However, he explains that with the recession phase approaching its end and the rebound supported by monetary easing, they see the possibility of better Sensex performance going forward, to which USD/INR is strongly correlated. Based on their revised forecasts, they are expecting the pair at 53.9 in Q2, 53.8 in Q3 and 54.0 in Q4. For 2014, they expect limited appreciation to 53.3., with the caveat that a prolonged period of declining inflation would also imply softer monetary policy, stronger equity valuations and a likely stronger INR.