USD/INR set to start rising this month – Mizuho

The USD/INR pair fell in May. In June, USD/INR is forecast to rise after falling slightly at the beginning, economists at Mizuho Bank reports.

Market participants anticipated investment fund inflow from abroad

“Many states have requested an extension to the lockdown measures. The negative impacts of the lockdown on the Indian economy are undeniable. Thus, many major ratings companies are revising the growth rate outlook for India downward. The market consensus is that the economy will certainly be weaker than the expected level. 

“It should be mentioned that the long-term interest rate in India for May fell below the 6.00% mark and remained low toward the second half of the month. Given the fundamentals of India, market participants are likely to sell the Indian rupee rather than buy it.”

“USD/INR has been falling based on Indian rupee-buying as generated in special fund inflows. As long as this trend continues, the pair is likely to fall in the near future. However, if market participants start to have interest in the fundamentals of India so as to better understand the trend, the trend would be inverted, encouraging market participants to sell the Indian rupee, which would reasonably lead USD/INR to start rising.”

“In terms of external factors, market participants should be particularly attentive to US interest rates and the US dollar exchange market, which are related to speculation about tapering in the US.”