Short yuan-long rupee trades catch the eye, RBI unlikely to stay on sidelines
Federal Reserve's commentary and the course of the dollar may dominate global market discussions, but a set of India-focused investors are moving their rupee trading calls to the Chinese yuan from the greenback, with Mint Road seen smoothening swings in exchange rates involving New Delhi's second-largest trade partner.
«I have also noticed that since the beginning of the year, there has been a lot of interest in buying Indian rupees, not against the US dollar but against some of the other Asian currencies, especially the RMB (Chinese currency),» said Patrick Law, Head of Asia Pacific Fixed Income, Currencies, and Commodities Trading, Bank of America.
So far in 2024, the Chinese yuan has weakened considerably versus the US dollar as the world's second largest economy battles multiple challenges in its post-COVID recovery. The rupee, however, has outperformed its Asian peers versus the greenback as a world-beating growth outlook draws in overseas funds.
«The short RMB-long Indian rupee trade (a trade betting on the rupee) is one of the popular ones that people were participating in. I would watch out for that,» Law said.
Beyond a point, however, the Reserve Bank of India is expected to step in to rein in the rupee's appreciation versus the Chinese currency as the central bank sticks to its «broad playbook» of managing volatility and ensuring smooth two-way flows, said Rahul Bajoria, head of emerging markets Asia economics, Barclays.
«We expect the RBI to continue defending 83.40/$1...CNH/INR however needs to be
