USD/INR to end the year at 71.00, closer to pre-covid levels – ANZ
|The Reserve Bank of India (RBI) is facing a tricky trilemma: FX management to ensure a competitive rupee, withdrawing excess systemic liquidity and keeping bond yields in check. Economists at ANZ Bank discuss certain tools that can be utilised by the RBI to manage the trilemma. Among them is allowing greater tolerance for rupee strength. The USD/INR pair is now forecast to end 2021 at 71.00, closer to pre-COVID levels.
Key quotes
“Swifter growth (GDP in Q3 FY21 witnessed a mild expansion) and stubborn inflation will prompt the RBI to normalise monetary policy, which it has already begun in parts.”
“In order to assuage markets, we believe the reliance on various tools to drain liquidity will become more important, like raising the reverse repo rate and the SLR. The rupee’s appreciation can be another channel and we think the RBI will ease its intervention as a result.”
“We expect USD/INR to end 2021 at 71.00, closer to its pre-COVID levels. We still believe a sharp appreciation is unlikely, given policymakers’ tilt towards self-reliance and a competitive rupee. USD/INR at 70.00 should be the line in the sand.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.