USD/INR likely to trade around 67 by end-2018 – Lloyds Bank

Over the past month, the USD/INR pair has consolidated near 64.8, which is below the 65.90 high in September. The pair depreciated by about 4 percent since the start of 2017. However, there are still plenty of reasons to anticipate a weaker rupee, noted Lloyds Bank in a research report.

Firstly, the Indian economy is highly dependent on crude oil imports. Therefore, higher crude oil prices would increase India’s demand for U.S. dollars. Secondly, reform attempts to stimulate economic activity, which is a key factor in underpinning currency inflows, have decelerated ahead of parliamentary elections in 2019.

This, along with the fact that India’s banks and firms continue to wrestle with subdued weak balance sheets, could undermine investment. In the second quarter, the Indian economic growth decelerated to 5.7 percent year-on-year from the first quarter’s 6.1 percent.

“Already some indicators point to softer growth in Q3, albeit possibly because of the implementation of the one-off national sales tax. We forecast USD/INR at 67.0 at end 2018”, added Lloyds Bank.

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