Indian Rupee: Gradual strengthening path outlined – MUFG

MUFG’s Michael Wan expects USD/INR to grind lower over the next 3–6 months towards 94.00, before rebounding to 96.00 in the next calendar year. The bank links this trajectory to stronger Dollar inflows from RBI’s FX measures, tempered by IPO-related FDI outflows and limited scope for sharp Indian Rupee strength.

Rupee path shaped by flows

"From an FX perspective, we forecast USD/INR grinding lower over the next 3-6 months towards the 94.00 handle, before rebounding towards 96.00 next calendar year."

"Net-net, the key takeaway from an FX perspective is that sharp INR strength sounds unlikely."

"We now raise our forecast for inflows from RBI’s FX measures to US$87bn from US$60bn previously, with the bulk of the flows concentrated in the September quarter."

"Nonetheless, with IPO announcements picking up and with that a likely rise in FDI repatriation outflows, we think this will be an important offset to stronger Dollar inflows."

"Net-net, we are forecasting USD/INR to move lower towards 94.00 over the next 3-6 months, before bouncing higher to the 96.00 handle next calendar year."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)