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USD/INR: Indian Rupee to depreciate moderately – MUFG

The Indian rupee is likely to depreciate moderately due to the potential strengthening of the US dollar in the near term, according to analysts at MUFG Bank. They forecast USD/INR at 82.300 by the end of the first quarter of next year and at 80.500 by the third quarter. 

Key Quotes:

“Tracking gains in most emerging Asian peers, the INR advanced mildly last month along with a mild gain in India’s stock market, with the benchmark BSE Sensex up 3.2% to 62,858 as foreigners’ net purchased USD3.11 billion worth of Indian equities in November. Easing crude oil prices also offered some support to the currency.”

“The RBI is likely to hike the benchmark repo rate by 50bps at the upcoming meeting on 7th December to further contain inflationary pressures. As inflation moderates further and falls into the central bank’s target range, the RBI will likely keep rates stable for a while and shifts some focus to growth.”

“In the near term, we see that fundamental factors including Fed rate hikes, a stronger US dollar, trade deficits and India’s soaring fiscal deficits, are likely to weigh on the INR, and China factor could also bring volatility to USD/INR movements. The strengthening of INR likely happens when Fed pivots and US dollar begins to weaken in 2Q2023. We expect USD/INR to end this year at 82.000, and next year at 79.800.

Author

Matías Salord

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

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