We expect USDINR to touch 81 before the end of FY23
Download ReportMARKET Musings - INR: Dollar and the anatomy of BoP deficit
The Indian rupee has weakened for six consecutive months and is currently trading at an all-time low. While RBI’s active use of FX Reserves has curbed volatility, depreciation pressures continue to persist on account of a multitude of global factors as well as few domestic ones. At an aggregate level, the factors impacting rupee can be analyzed through the prism of the dollar trajectory and Net BoP position. We believe both these factors would be unsupportive in FY23 as dollar tailwinds persist on account of carry support and geopolitical uncertainty while India could see its second highest BoP deficit since the Global Financial Crisis. As such, we expect USDINR to touch 81 before the end of FY23. RBI’s strong FX Reserves and India’s attractive long-term economic potential would buffer any precipitous decline in the value of the currency.