USD/INR likely to trade around 64.0 mark with 63.5 support for now, says Scotiabank

The USD/INR currency pair is expected to trade around the 64 mark with a 63.5 support for now. Meanwhile, the geopolitical situation on the Korean Peninsula and the Catalan independence referendum set for October 1 could swing market sentiment into risk aversion from risk appetite suddenly, Scotiabank reported.

An excessive strength of the INR is not in the regulators’ interest, even though India doesn't rely on an export-driven growth strategy. The Indian government will need to shore up exports to regain the crown of the fastest growing major economy in the world as the GST rollout from July 1, 2017, could drag down private consumption that is a key driver of the country’s economic growth.

It comes as no surprise that India’s foreign reserves rose to a record high of USD398.1 billion as of September 1, in addition to the RBI’s USD30.0 billion long positions in FX forwards/futures as at end-July.

The growth in India’s bank lending has remained subdued, which may have weighed on economic growth. RBI Deputy Governor Viral Acharya said last Thursday that the primary cause of the recent slowdown in growth has been the stress on banks’ balance sheets.

"We believe US debt limit extension for three months through 8 December will help bolster risk appetite in general till the ECB’s October 26 meeting. In addition, India’s slower economic growth has raised market hopes for further monetary easing. Three Indian companies are scheduled to launch their initial public offers (IPOs) this week to raise about INR 66bn. Thus, foreign investors will continue to chase India’s high-yielding financial assets at the current stage. We stay with our long INR carry position funded with the low-yielding TWD," the report said.

Meanwhile, FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest