The Indian rupee is seen appreciating into year-end on strong inflows, but competitiveness concerns could see it weakening in 2022, according to economists ANZ Bank.
The RBI’s FX policy remains the key driver of the rupee
“Foreign portfolio and direct investment inflows will likely remain robust, as India’s economic recovery bolsters its relative appeal among South Asian economies.”
“Although the RBI may still continue to fortify its forex reserves war chest, the pace of inflow absorption may slow amid the central bank’s simultaneous efforts to manage surplus liquidity in the banking system.”
“Over 2022, we expect a larger trade deficit due to a stronger recovery in imports, which will likely offset some of the appreciation pressure on the rupee.”
“A weaker rupee may also be favoured by the RBI to maintain export competitiveness.”
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