USD/INR likely to trade around 66.6 by end-2017, says Lloyds Bank

The USD/INR pair is yet to reverse its losses since February because of increased risk appetite and lower crude oil prices. Year-to-date the INR is more than 5 percent stronger against the U.S. dollar, noted Lloyds Bank in a research report. Still, slight retracement in gains is likely as the year progresses. Firstly, this is because the Reserve Bank of India is likely to maintain a comparatively more dovish stance as India’s inflation is now below target.

Secondly, intervention is likely to pick up pace as the central bank appears to further build foreign exchange reserves, stated Lloyds Bank. India’s foreign exchange reserves rose by USD 26 billion since the beginning of the year. However, a formal inflation-targeting regime instated at the beginning of 2015 dramatically lowers the possibility of a sharp uncertainty related to RBI and government attempts to tackle non-performing loans in the banking sector.

“We forecast USD/INR to end the year at 66.6”, added Lloyds Bank.

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