USD/INR: Rupee seen between 69-72 by Q1 2019 if Oil remains weak – UBS

In the latest client note, analysts at the Swiss investment banking company, UBS Group AG, noted that the Indian Rupee to maintain its recovery mode early next year should the current trend of lower oil prices last.

At the press time, USD/INR is seen firmer so far this Tuesday, flirting with the 71 handle. Despite the renewed weakness in the Rupee, it has recovered almost 4% from the record lows reached at 74.49 in early October.

Key Quotes (via ET Bureau):

“The fair value of the rupee is in the range of 67-70, based on the productivity-adjusted Real Effective Exchange Rate (REER).

If the current trend of lower oil lasts through March 2019, the currency could trade between 69 and 72 to a dollar.

A sustainable rupee appreciation is still some time away, given the general elections, MSCI EM rebalancing in the second or third quarter of 2019, and New Delhi’s basic balance deficit despite the plunge in global oil prices.  

A marginal depreciation bias for the rupee could continue into FY20, although the currency is unlikely to reprise this calendar year’s weak performance.”  

USD/INR Technical Levels: