USD/INR: Indian Rupee weakness to be contained in recent range – CIBC

analysts at CIBC, point out the stability in the Indian Ruppe is driven by unwavering investor interest. They see the USD/INR at 72.0 during the fourth quarter and at 71.3 in Q2 2020. 

Key Quotes: 

“Despite softer growth, higher inflation and lower domestic rates, USD/INR has been locked into a relatively tight and stable range of 70.35-71.90 over the last month.”

“We expect some modest weakness in the INR, but to be contained within recent boundaries.”

“Like many economies in the region, India’s exposure to trade, and global activity more generally, has seen the economy slow from its previous pace. GDP growth in Q2 was the softest (+5.0% y/y) since early 2013, with headlines heralding India as overtaking China as the fastest growing economy, but not lasting for long. Softer growth prompted the RBI to ease, cutting rates early this month by lowering the repo rate to 5.15% from 6.50%. The bank’s commitment to maintain an accommodative stance ‘as long as it is necessary’ provides encouragement that the economy can receive required support if necessary.”

“The global economy will likely be more influential in lending to a recovery. Portfolio flows into equities of $7.4bln and of $4bln into bonds year-to-date are favorable in comparison to recent years, suggesting that investor interest remains robust.”