USD/INR to drift down towards 81.50 by year-end – Commerzbank
Year-to-date, INR is down 0.3% vs. USD. Economists at Commerzbank analyze Rupee’s outlook.
RBI is expected to leave rates unchanged for the rest of the year
We project USD/INR to drift down towards 81.50 by year-end. The main reasons include: Continued strong economic performance; Positive real interest rates. Inflation has moderated steadily since the peak of just under 8% in April 2022 to an average of 5.8% so far this year. RBI has hiked by 250bp to 6.50% since May 2022. This implies positive real interest rates at around 70 bps; A stabilization in CNY volatility and stable to lower oil prices should also aid INR.
RBI is in a wait-and-see mode and there is no incentive for a marked change in policy anytime soon. Nevertheless, RBI would need to stay vigilant on food prices and will continue to keep a close eye on the monsoon season.
Source: Commerzbank Research
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