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Rupee jumps on S&P's revision of India's outlook up to stable - TD Securities

FXStreet (Łódź) - Cristian Maggio, Head of Emerging Markets Research at TD Securities comments on the rupee's reaction to S&P' decision to upgrade India's outlook to stable from negative, while keeping the sovereign rating at BBB-.

Key quotes

"The outlook change reflects S&P’s view that 'India's improved political setting heralds a more conducive environment for reforms, providing a boost to growth prospects and the potential for improved fiscal management'.”

"This statement is particularly significant as the sub-potential growth and wide fiscal deficit were previously citied as India’s major weaknesses and possible causes of downgrades."

"The immediate reaction to the announcement was USDINR falling 0.5% to 61.08."

"1m NDF moved in tandem with spot and is currently exchanged at 61.53, so still nearly half a percentage point below the levels prior to the S&P review."

"This supports our view that the improving macroeconomic outlook will continue to bear positive effects on Indian asset pricing."

"EM FX also seemed to recover on this event today."

"At the same time, we are wary that changing expectations on the Fed’s resumption of monetary tightening could trigger further adjustments in the EM space in the coming months. For these reasons, we prefer RV strategies to trade the INR long leg."

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