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ANZ analysts point out that the Reserve Bank of India’s (RBI) FX intervention has become a powerful wedge between a relatively weak INR performance and a solid balance of payments (BoP) position.

Key Quotes

“The BoP has improved remarkably over the last two quarters and should continue to do so into 2020, despite the slew of bad news on the real economy and fiscal position. This is coinciding with a preliminary shift in the RBI’s FX policy.”

“It now seems that the central bank is attempting to maintain stability vis-à-vis the CNY. The bilateral trade deficit with China is a well flagged issue, but more recently the chorus to strengthen manufacturing and exports is also finding sympathy among policymakers.”

“We now forecast USD/INR to trade in a fairly narrow range, ending 2020 at 72.50.”