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

In July, the USD/INR pair rose to 69.0925, a record high in the midst of the movement of crude oil price and a broad EM sell-off. These levels are quite high given the fundamentals, though admittedly, there continue to be several reasons for the pair to stay elevated versus the rates seen earlier in the year, noted Lloyds Bank in a research report.

The Indian economy continues to be highly dependent on crude oil imports, signifying that a future rise in energy prices would increase their demand for U.S. dollars. Moreover, reforms attempt to stimulate economic activity are expected to decelerate before elections in 2019. Despite this, due to the scale of the June move, many key valuation metrics now point to a slight undervaluation, stated Lloyds Bank. Indian economic growth story continues to be positive, after accelerating to 7.7 percent year-on-year in the first quarter, though there are risks to future growth projections tilted to the downside.

“We forecast USD/INR at 67 at end-2018”, added Lloyds Bank.