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RPT-UPDATE 1-MARKET EYE WEEKAHEAD-Inflation, elections key for India debt/FX
July 16, 2012 / 3:48 AM / 5 years ago

RPT-UPDATE 1-MARKET EYE WEEKAHEAD-Inflation, elections key for India debt/FX

(Repeats item from Friday with no change to ext)
* Headline inflation data on Monday will be the key cue for
India's debt markets, coming ahead of the central bank's policy
review on July 31.
* A Reuters poll forecasts wholesale price inflation likely rose
by 7.62 percent in June from a year ago, the highest this year.
* Traders who had previously bet the Reserve Bank of India would
keep the repo rate on hold are now slowly shifting views towards
a rate cut after the sharp downward revision in the April
factory output data on Thursday. 
* An inflation print of 7.25 percent or below, and core
inflation of 4.5 percent or below, could firm views for a 25
basis points rate cut traders said, pushing bond yields and OIS
rates down by around 4-6 basis points.
* The benchmark 5-year OIS fell to as low as
6.96 percent on Thursday, its lowest since late December 2011,
while the one-year rate touched a low of 7.56
percent, its lowest since mid-June 2012. 
* Traders expect the rupee to remain choppy next week,
given volatile global risk environment, with 56/dollar acting as
key resistance.
* India's presidential elections are on Thursday, with former
finance minister Pranab Mukherjee expected to be selected for
the ceremonial post.
* Investors have been hopeful the elections will mark the start
of fiscal policy reforms from the government, such as a hike in
diesel prices.
* India's worsening fiscal outlook has been a key reason behind
the rupee's slump this year.


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