Increasing base rates in India and attempts to reduce volatility by the authorities only has limited meaning for the INR. What is more important for the INR and what has always been more important is how the world perceives the currency. For globalisation has not only hit the world recently, it has been with the world for generations. The Dravidians didn't build the Angkor vat all the way in Cambodia for no reason.
Thus, lets look abroad. The yield differential between the US and India has widened as a result of this move. This trumps any equity inflows or outflows for the moment as realistically yields are all the markets have been looking at. Bond outflows there may be but the attraction of carry is likely to underpin the INR for now. Lets look lower towards 58.95 for USD/INR and then reassess.
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