Frances Cheung, analyst at Westpac, points out that the RBI kept its key policy rates unchanged and with less hawkish tone, USD/INR is likely to go higher supported by the potential oil production cut.
Key Quotes
“The decision was unanimous, as opposed to having one member voting for a hike at the October meeting. Inflation forecast for H2 fiscal 2019 was revised down. Patel said there is the possibility of “commensurate policy actions”. Overall the tone has turned less hawkish. This adds to our view for USD/INR to go higher on a potential oil production cut. Risk to our view is the uncertain impact on oil prices in the scenario where there is no agreement on the volumes of production cuts. Other than oil, India’s twin deficits remain as the key risk factors which should prevent USD/INR from falling too rapidly.”
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