Analysts at Capital Economics expect the Indian rupee to devalue against the US dollar in the coming months, as rising US Treasury yields will continue to rise.
Key statements:
“With US Treasury yields now looking set to rise even higher in the next few years, we expect the US dollar to appreciate further.”
“Now we are forecasting that the rupee depreciates from 72.6 / $ currently to 74 / $ and 75 / $ by the end of 2021 and 2022 respectively. Our previous forecasts implied a slight appreciation of the rupee over the next two years. “
“There should be limited economic consequences from a weaker rupee. The pass-through to inflation is small by emerging market standards. Furthermore, India has a very low debt burden in foreign currency. So, at least the existing tensions in the banking sector would not be aggravated by the weakness of the currency. “
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