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RBI fighting a lost INR battle, say analysts

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A stronger USD would imply higher global inflation exported by the US, lower global trade, cry for reverse FX wars, and pressure on equities and emerging markets assets, Emkay Global Financial Services said in a report.

The global narrative is undergoing a substantial regional rotation in favour of the US exceptionalism, even as we are unlikely to see the US growth upgrades. The theme of dollar dominance is still alive.

While GBPINR is down 4 per cent, USDINR is up 2 per cent since the September FOMC meeting — one of the worst EM hits.

“King Dollar is still on the throne… with RBI fighting a lost INR battle,” Emkay Global Financial Services said in the report.

“INR readjustment is catching up faster than peers, as it was held stronger in past adjustments by policy intervention. India’s massive FX defence, amounting to more than US$100bn estimated since October-21 (spot + forwards) means that the war-chest is falling faster than the pace at which the war is fading. Amid emerging regional imbalances, we reiterate that the RBI will eventually let the exchange rate adjust to new realities, albeit in an orderly manner, letting it act as an automatic macro stabilizer to the policy reaction function”, the report said.

The GBP free-fall and massive FX vols have only added another complicated layer to DM FX order, adding credence to our long stated view that dollar dominance is here to stay even as we are unlikely to see US growth upgrades in this downcycle.

US exceptionalism rub-off has finally let the INR loose, despite RBI’s active FX intervention — an indication of the impending range shift. INR readjustment has been swift, and the RBI will eventually need to let the exchange rate adjust to these new realities and act as a natural macro stabiliser, albeit orderly, the report added.

The direct macroeconomic impact of the UK shocks on India will be limited via the trade impact, but global risk will likely weigh on India in the near term. GBP weakness may aid Tata Motors on the UK operational front, albeit this will be countered by near-term MTM losses on its USD-denominated debt. In large-cap ITeS, TCS and Wipro lead in terms of GBP exposure.

International

Striking Iranian regime targets with unprecedented force: Israel Defence Minister

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New Delhi, June 23: Israel’s Defence Minister Israel Katz announced Monday that the Israel Defence Forces (IDF) are currently striking with “unprecedented force” regime targets and governmental repression bodies in the heart of Tehran.

“In accordance with the directives of Prime Minister Benjamin Netanyahu and myself, the IDF is now attacking with unprecedented force regime targets and government repression bodies in the heart of Tehran, including the Basij headquarters, Evin prison for political prisoners and regime opponents, the ‘Israel Destruction’ clock in Palestine Square, the Revolutionary Guards’ internal security headquarters, the ideology headquarters, and other regime targets,” Katz posted on X.

He added, “For every shot fired at the Israeli home front, the Iranian dictator will be punished. The attacks will continue with full force. We will keep acting to protect the home front and defeat the enemy until all war goals are achieved.”

Meanwhile, Iran’s Supreme Leader Ayatollah Ali Khamenei on Monday issued a stern warning in his first reaction following US strikes on Iranian nuclear sites.

“The Zionist enemy has made a big mistake, committed a big crime; it must be punished, and it is being punished right now,” Khamenei said on X, calling the attacks “a big crime.”

The US strikes came after Israeli attacks on June 13 that targetted various locations in Iran, including nuclear and military sites, resulting in the deaths of senior commanders and nuclear scientists.

In response, Iran also launched missile and drone strikes on Israel.

Earlier that day, Israeli Prime Minister Benjamin Netanyahu reiterated the country’s determination to press on with its operations.

“Israel will continue to operate at full tilt in both Iran and Gaza,” he said, adding, “We will not stop this historic operation before we achieve our goals.”

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International

Israel makes new raids on Iran after intercepting missile

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Jerusalem, June 23: Israel conducted a new wave of airstrikes on Iran early Monday, shortly after intercepting a missile fired from Iran, said the Israeli military.

The Israeli Air Force targetted what it described as “military infrastructure sites” in Iran’s Kermanshah province, striking surface-to-surface missile launch and storage facilities, the military said in a statement. More than 15 warplanes participated in the operation.

The strikes came shortly after Iran fired a missile at Israel before dawn and triggered air raid sirens across much of the country. The Israeli military said the missile was shot down, causing no casualties or damage.

The Iranian attack followed US President Donald Trump’s suggestion of a possible regime change in Iran, as US bombers and submarines carried out heavy strikes on Iranian nuclear facilities, Xinhua news agency reported.

Earlier in the day, Iran’s Supreme Leader Ayatollah Ali Khamenei, in his first reaction following the US strikes on Iranian nuclear sites, said that the punishment for Israel, referred to as the “Zionist enemy,” will continue.

Calling the attacks “a big crime,” Khamenei warned of retaliation.

Talking to X, he stated, “The punishment continues. The Zionist enemy has made a big mistake, committed a big crime; it must be punished, and it is being punished; it is being punished right now.”

The US strikes followed Israeli attacks launched on June 13 on various targets in Iran, including nuclear and military sites, killing several senior commanders, nuclear scientists, and civilians, Xinhua news agency reported.

Iran has retaliated with missile and drone strikes on Israel.

Earlier on Sunday, Israeli Prime Minister Benjamin Netanyahu affirmed that Israel would press ahead with its operations. “Israel will continue to operate at full tilt in both Iran and Gaza,” he said, vowing not to be “dragged into a war of attrition.”

“We will not stop this historic operation before we achieve our goals,” Netanyahu stated.

Meanwhile, several reports cited that, a day after US strikes on Iran’s nuclear facilities, the Iranian parliament voted in support of closing the Strait of Hormuz, one of the world’s most critical oil transit chokepoints. Any final decision on retaliation, however, will rest with the country’s Supreme National Security Council..

The US strikes on three Iranian nuclear sites — dubbed “Operation Midnight Hammer” – in Isfahan, Fordow, and Natanz mark the first direct involvement of America in the escalating crisis between Iran and Israel.

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International

Iran executes man accused of spying for Israel

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Tehran, June 23: Iran on Monday executed a man found to be guilty of spying for the Israeli intelligence service, the judiciary of the Islamic Republic reported.

“Mohammad Amin Mahdavi Shayesteh was hanged this morning for intelligence cooperation with the Zionist regime,” stated the judiciary of Iran. (Zionist regime is the term used by Iran for Israel)

Shayesteh was arrested in 2023 for having alleged links to Mossad, Israel’s intelligence agency.

This comes as tensions continue to escalate between Iran and Israel.

Earlier also, on June 14, the Iranian authorities executed a man accused of espionage for Mossad.

“Israeli Mossad spy executed after full criminal trial, the verdict being upheld by Iran’s Supreme Court,” reported Iran’s Mehr news agency.

According to reports, Esmail Fekri was arrested in December 2023 during a complex intelligence operation conducted by the Iranian security agencies.

The execution comes at a time when the war between the two countries continues to intensify and has drawn global attention for threatening the peace of the entire West Asia, a region already facing massive geopolitical turbulence.

Not much information about Fakhri’s arrest, trial proceedings, or specific charges has been revealed, as cases dealing with espionage rarely provide full details, given the sensitivities attached to it.

The Mizan news agency of the Iranian judiciary reported that Fekri sought to send Iran’s classified and sensitive information to Mossad in return for money.

Iran, in late May, had also announced the execution of another individual, identified as Pedram Madani, on the conviction of spying for Israel.

The Iranian media claimed on Sunday that the police in Alborz province in the west of Tehran had arrested two people suspected of having links to Mossad. Later in the day, Israel said it had also arrested two citizens suspected of working for Iran’s intelligence services.

These cases reflect ongoing tensions between Iran and Israeli intelligence agencies, which have been engaged in covert intelligence and counterintelligence operations and have dealt a heavy blow to each other via covert operations.

The two intelligence agencies are engaged in a tit-for-tat campaign combining classic espionage, sabotage, aerial strikes and other covert assassinations.

Several reports claimed that Israeli spies were already on the ground and smuggling weapons into the hostile territory, much before the launch of airstrikes on Tehran.

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