Economists at MUFG Bank have revised their outlook on the Indian Rupee (INR), shedding their earlier cautious stance and now projecting the USD/INR pair to reach 81.50 by the year-end. This adjustment reflects a more optimistic perspective, as they had previously forecasted it to be at 82.00.
The analysts anticipate that the Reserve Bank of India (RBI) will persist in intervening to absorb foreign exchange (FX) inflows, effectively curbing the extent of INR appreciation. Despite this intervention, the economists believe that the balance of risks now leans towards a stronger INR, prompting the removal of their previous cautious view on the currency.
In their updated forecasts, MUFG Bank now envisions the USD/INR at 83.00 in the next three months, and further strengthening to 81.50 in the next 12 months. This marks a shift from their earlier predictions of 83.30 and 82.00, respectively. The economists also maintain their expectation that the RBI will continue accumulating FX reserves throughout 2024, thereby limiting the potential for substantial INR appreciation.
The analysts anticipate that the RBI may permit further depreciation of USD/INR once the weakness in the US Dollar becomes more evident. This adjustment in outlook aligns with the broader global economic landscape and factors influencing currency markets, indicating a nuanced approach to the evolving dynamics of the USD/INR pair in the coming months.