The Indian rupee led declines among most of Asia’s emerging currencies in 2022, down 10.9% year-to-date against the US dollar (as of December 15), they note. MUFG analysts. They hope that the pair USD/INR reach 79.8 by the end of 2023. Currently trading at 82.75.
The rupee is boosted by the relative better performance of India’s growth
“The Indian rupee has been the worst performing Asian currency this year, as net outflows of foreign portfolio investment in Indian equity markets resumed amid a stronger dollar, even as the India’s Nifty50 and Sensex were in the red on most of the world’s stock indices.Like other Asian currencies, the US dollar remains in the driver’s seat for higher USD/INR That being said, India’s relatively outperforming growth performance in 2023 compared to most Asian economies, as well as the US and Europe, coupled with a sustained weaker dollar after 1Q23 , the channeling of capital into Indian markets by foreigners should return, offering support to the INR.”
“The central bank is likely to make a final 25bp hike at its next meeting in February 2023, raising its repo rate to a terminal level of 6.50%. In particular, the real policy rate has turned positive , which poses downside risks to economic growth. This also suggests that the policy rate spike this cycle is close to supporting the economy.”
“We see USD/INR rally as high as 82.3 in Q1 2023 before turning down again thereafter to hit 79.8 by the end of 2023.”
Source: Fx Street
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