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Analysts at MUFG Bank, expect the Indian Rupee to remain under pressure over the next months. They forecast USD/INR at 71.500 by Q3, 72.000 by Q4 and 72.500 by Q1 2020.  

Key Quotes:

“In the coming months, we continue to expect the rupee to be under pressure as the dollar finds support from potential euro and British pound weakness due to monetary easing by the ECB and risks of a no deal Brexit. The rupee would also remain vulnerable to weak global risk sentiments and prospects of further easing by the RBI.The RBI has cut the benchmark repo rate by a cumulative 110bps to 5.40% this year.”

“Given the deceleration in India’s economic growth, RBI is set to continue cutting rates. In order to improve the monetary policy transmission, relevant financial products will be linked to the repo rate. The record INR1.23tn in dividend payment to the government by the RBI could help plug the fiscal deficit, and also help finance more fiscal stimulus measures on top of that announced in August which include a one-shot INR700bn bank recapitalisation.”

“One major factor that could help cushion the fall in the rupee is benign oil prices, which makes oil imports relatively cheap.”