Halister News

(Bloomberg) -- The imminent departure of well-respected Reserve Bank of India governor Raghuram Rajan is a genuine blow to INR, but fundamentals remain very positive, Bloomberg strategist Mark Cudmore writes.

• NOTE: Click here for today’s FX macro fundamental scorecard

Currencies’ long-term bullish/bearish bias:

• PHP and IDR overall biases remain bullish
• JPY overall bias turns neutral from bearish as momentum continues to be yen-positive
• USD overall bias turns bearish from neutral, with short-term momentum clearly negative
• EUR overall bias remains bearish
• Rajan is very respected by markets and his departure at the end of his term in Sept. would leave his reform process unfinished, weighing on INR fundamentals
  • However, fundamentals are easing from a high level and remain very positive
  • India’s real GDP growth is the fastest among G-20 economies
  • According to IMF PPP metrics, INR is now the most undervalued out of all tradeable liquid currencies
  • With high real yield, bond market will remain attractive after current risk-aversion abates
• INR momentum is currently very negative but when momentum stabilizes, rupee can return to being one of the best- performing currencies on a total return basis, as it was in both 2014 and 2015
• Any aggressive rise in commodity prices would be a risk to watch as India is a major commodity importer
• NOTE: Goldman Sees Rupee Selloff Curbed as Investors Look Beyond Rajan

• NOTE: The FX Macro Fundamental Scorecard presents long-term relative-value comparisons; current trading dynamics are captured by the trend/momentum filter, which is based on momentum indicators against primary trading partners across four time spans

• NOTE: Mark Cudmore is a former FX trader who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice.