In January, the Indian Rupee (INR) exhibited marginal strength against the US Dollar (USD), setting the stage for a nuanced outlook. MUFG Bank’s economists delve into the USD/INR dynamics, offering insights into the currency pair’s anticipated trajectory.
MUFG Bank’s Analysis:
The economists at MUFG Bank anticipate a decline in USD/INR towards the 82.00 level in the latter half of 2024. This projection is grounded in the expectation that the INR will derive benefit from robust capital inflows resulting from bond index inclusion scheduled for 2024. Simultaneously, the Reserve Bank of India (RBI) is anticipated to intervene strategically to absorb these inflows, thereby curbing the extent of INR appreciation.
Short-Term Outlook:
In the near term, specifically in the first quarter of 2024 (Q1), MUFG Bank foresees USD/INR hovering around the 83.00 level. This is attributed to the RBI’s proactive approach in rebuilding foreign exchange (FX) reserves. However, the economists predict a more pronounced decline in the currency pair towards the 82.00 level as the broader Dollar weakens in the second half of 2024.
MUFG Bank’s assessment reflects a nuanced understanding of the economic landscape, taking into account capital inflows, central bank interventions, and broader market dynamics. As the year unfolds, the USD/INR trajectory will be closely watched, and MUFG Bank’s insights provide valuable perspectives for those navigating the intricacies of the currency markets.
