In the past month, the Indian Rupee (INR) has experienced a marginally broader trading range, deviating from the tight confines around the 83.30 level against the US Dollar (USD). Analysts at ING delve into the outlook for the USD/INR exchange rate.
Potential Shift to an Asymmetric Stance
Hovering at 83.10, the INR hasn’t exhibited significant strength, but there are indications that the Reserve Bank of India (RBI) may adopt a more permissive approach to appreciation, engaging in more asymmetric currency management.
Inflation has inched towards the upper end of the RBI’s inflation target range, primarily attributed to food-related factors. It is anticipated that inflation will retreat closer to 5% in the near term. However, the expectation remains that the RBI will refrain from easing monetary policy until after the Federal Reserve initiates its first move.
USD/INR Outlook: 1 Month – 83.00, 3 Months – 83.00, 6 Months – 83.00, 12 Months – 84.00
The ING analysis underscores a nuanced perspective on the USD/INR exchange rate, considering potential shifts in the RBI’s approach and the impact of global economic factors, particularly the actions of the Federal Reserve. The modest deviation in the trading range suggests a subtle recalibration in market dynamics, prompting a closer examination of the evolving currency landscape.
