Forex Flash: Medium-term bearish view on the Indian Rupee - Nomura

FXstreet.com (Barcelona) - Nomura strategists recently reported the exit of a long USD/INR position "given the risk of near-term positive INR sentiment as market expectations of a policy rate cut (short-term supportive of INR) have risen due to yesterday's weaker-than-expected March WPI inflation print."

Nomura adds: "Our India economist, Sonal Varma, attaches an 80% probability to the Reserve Bank of India (RBI) cutting the repo rate by 25bp on 3 May, followed by a long pause. The March trade deficit (scheduled for release this week) is expected to narrow, largely on seasonal factors (Nomura: USD11.9bn, Previous: USD14.9bn), which we believe could raise the risk of market participants selling USD/INR as they further price in further policy rate cuts."

Nomura maintains a medium-term bearish INR view "as negative structural issues related to the current account and fiscal deficits remain intact, and political considerations become more significant as we edge towards state and general election dates..."