INR: No respite for the Indian rupee - ING

Prakash Sakpal, economist at ING, suggests that high trade deficit of Indian economy remains the biggest concern for the rupee, but it retains its position of Asia’s most underperforming currency coming into 2019.

Key Quotes

“There is nothing in the forthcoming economic data altering this state of affair.”

“Under the new governor, the central bank of India has upped its ante towards monetary easing to boost growth as the government wants before the elections in May this year. The consumer price data continues to be friendly for such a policy shift; we estimate CPI inflation to nudge further downwards to 2.2% year-on-year on lower food and energy prices in December.”

“We have now come to the view that the central bank will keep rates on hold throughout 2019, revised from our earlier view of two 25bp rate hikes in the second half of 2019. However, we won’t be surprised by a cut either, given the odds of such a move before elections have now increased. We continue to see the rupee trading up to the 73 levels against the USD in this current quarter.”

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