USD/INR: Modest appreciation pressures, forecast at 75.00 by end-2020 – ANZ

FXStreet Team FXStreet

India’s improving external balances will support the INR. Furthermore, increased FX intervention will also see modest appreciation pressures on the rupee. Therefore, economists at ANZ Bank forecast the USD/INR pair at 75.00 by year-end.

Key quotes

“Surpassing $500 billion, India has now become the fifth largest holder of FX reserves globally. The scale of intervention represents a change in the RBI’s FX policy. A host of issues ranging from safeguarding against the risk of a further downgrade in the sovereign rating and enhancing the country’s appeal as a manufacturing base explain this policy shift.”

“India’s solid external position is a diamond in the rough. We estimate that the current account, basic balance and overall balance of payments are all in surplus at this stage and supportive of a stronger rupee. In fact, the current account is set to record a surplus in FY21, estimated at 0.8% of GDP for the first time in 15 years.”

“We believe there is scope for modest appreciation owing to an improved external position and because intervention in the FX market comes with a cost. We expect USD/INR to end 2020 at 75.00.”

Author

FXStreet Team

FXStreet

EUR/USD meets initial support around 1.1800

EUR/USD remains on the back foot, although it has managed to reverse the initial strong pullback toward the 1.1800 region and regain some balance, hovering around the 1.1850 zone as the NA session draws to a close on Tuesday. Moving forward, market participants will now shift their attention to the release of the FOMC Minutes and US hard data on Wednesday.

GBP/USD bounces off lows, retargets 1.3550

After bottoming out just below the 1.3500 yardstick, GBP/USD now gathers some fresh bids and advances to the 1.3530-1.3540 band in the latter part of Tuesday’s session. Cable’s recovery comes as the Greenback surrenders part of its advance, although it keeps the bullish bias well in place for the day.

Gold hangs near one-week low; looks to FOMC Minutes for fresh impetus

Gold is consolidating just above the $4,850 level, having touched a one-week low on Tuesday, amid mixed cues. Signs of progress in US–Iran talks dent demand for the traditional safe-haven bullion. Meanwhile, rising bets for more Fed rate cuts keep the US Dollar bulls on the defensive and act as a tailwind for the non-yielding yellow metal. Traders also seem reluctant ahead of the FOMC Minutes, which would offer cues about the Fed's rate-cut path and provide some meaningful impetus.

RBNZ set to pause interest-rate easing cycle as new Governor Breman faces firm inflation

The Reserve Bank of New Zealand remains on track to maintain the Official Cash Rate at 2.25% after concluding its first monetary policy meeting of this year on Wednesday.

UK jobs market weakens, bolstering rate cut hopes

In the UK, the latest jobs report made for difficult reading. Nonetheless, this represents yet another reminder for the Bank of England that they need to act swiftly given the collapse in inflation expected over the coming months.

Ripple slides to $1.45 as downside risks surge

Ripple edges lower at the time of writing on Tuesday, from the daily open of $1.48, as headwinds persist across the crypto market. A short-term support is emerging at $1.45, but a buildup of bearish positions could further weaken the derivatives market and prolong the correction.