India Economics:US$/INR,Moving sideways

Rupee has remained steady but underperformed in the context of EMcurrencies: The INR has remained largely steady in 2018YTD, moving only0.2% after gaining 6.4% in 2017. While at the margin macro stability concernshave risen as reflected by higher inflation, a wider trade deficit and steadilyelevated oil prices, a weaker USD has come to the rescue of the INR.However the INR has underperformed in the context of EM currencies.

2018to be marked by a trend of dollar weakness…: Our global teamexpects the dollar to remain on weak footing in 2018(see Tax Reform Will NotStop The Dollar Bear Market... - “America First” = weaker Greenback). Assuch we believe that dollar weakness and support from capital flows will keepthe INR supported.