Analysts at Nordea Markets suggest that the INR relief may be temporary as India’s external vulnerability and the country’s looming banking crisis leave it prone to another sell-off.
Key Quotes
“After reaching a historically high level of 74.4 in early October, the USD/INR has declined since. This is largely attributable to plunging oil prices, which relieves the pressure on India’s current account balance.”
“However, the relief may prove to be temporary. Elevated global geopolitical risks, tighter ï¬nancial conditions in the US and domestic challenges are just some of the issues that will cast a dark shadow over the INR’s recovery in 2019.”
“India’s current account deï¬cit has long been its Achilles’ heel. Its dependence on oil imports implies that the INR could weaken again if the oil price starts to rise.”
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