Indian rupee soft amid contagion

Swissquote Bank Research Team Swissquote Bank Ltd

USD/INR hit its historic high: currently at 69.83, it is expected to trade sideways near the 70 psychological resistance level. The Reserve Bank of India (RBI) decision to raise its Repo Rate for a second consecutive time on 1 August appears to have paid off. The decision was taken amid strong economic growth (GDP 7.40% for 2018) and increasing inflation numbers that are strongly driven by oil price volatility and INR weakness. Headline inflation in July remains at 4.17%, a slowdown from May’s 5%.

As the Turkish lira is spooking emerging market currencies, the RBI will remain attentive and safeguard economic welfare by raising rates at its 4 October meeting. Additionally, core inflation in July remains at 6.29% (prior: 6.29%), too high for the RBI’s liking.

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Swissquote Bank Research Team

Swissquote Bank Ltd

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