The bi-monthly monetary policy statement by the RBI has assessed that international financial markets have been resilient to political uncertainties.
Volatility has declined, except for sporadic reactions to hints of balance sheet adjustments by systemic central banks.
Equity markets in most advanced economies have registered gains, with indices crossing previous highs in the US, but European markets were weighed down by Brexit talks and the strengthening euro.
In the emerging markets, equities have gained on surging global risk appetite underpinned by improving macroeconomic fundamentals that have been pulling in capital inflows.
Bond yields in major advanced economies have hardened on expectations of monetary policy normalisation, with German bunds reaching an intra-year high.
In the emerging markets, the situation has remained diverse, driven by domestic factors, and fixed-income markets have been generally insulated from the bond sell-off in advanced peers.
In the currency markets, the US dollar weakened further and fell to a multi-month low in July on weak inflation and uncertainty around the policies of the US administration.
The euro, which has remained bullish, rallied further on upbeat economic data. The Japanese yen has generally eased, interspersed by bouts of appreciation on safe haven demand.
Emerging market currencies largely remained stable and have traded with an appreciating bias.
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