Economists at TD Securities analyze CNH/INR outlook.

CNY more sensitive to USD strength than INR

“India has benefitted from a surge in foreign portfolio flows, while FDI inflows have remained firm. We expect inflows to continue to strengthen, providing support to the INR. Separately, India's trade deficit is narrowing, with the country registering its smallest deficit in April since Aug 2021. This all bodes well for the currency and while RBI FX intervention remains a risk to spot appreciation, carry and risk adjusted returns are attractive.” 

“In contrast, the PBoC may favour some short term underperformance of CNY in the wake of softer China economic data and a firm USD, with the CNY more sensitive to USD strength than INR.”

“CNH/INR broke through its 200-DMA at 11.75 and negative MACD differential (12,26) favours a continued move lower.”

“The currency pair is trading around its 76.4% Fib support level at 11.65 and a push lower opens up the 61.8% Fib support at 11.30 (5-year daily window) and then 0% Fib support at 11.01.”