USD/INR likely to trade at around 67 by end-2017, says Lloyds Bank

The USD/INR currency pair has yet to reverse its losses since February because of the increased risk appetite and lower crude oil prices, noted Lloyds Bank in a research report. The Indian rupee, on a year-to-date basis, is almost 5 percent stronger against the U.S. dollar. Still, a retracement in gains is expected as the year progresses.

Firstly, this is because the Reserve Bank of India is expected to keep a comparatively more dovish stance as Indian inflation is below the target rate. Secondly, intervention is expected to pick up pace as the central bank seeks to further build foreign exchange reserves, stated Lloyds Bank. India’s foreign exchange reserves were up by USD 20 billion since the beginning of the year. However, a formal inflation-targeting regime instated at the beginning of 2015 greatly reduce the possibility of a sharp decline like the one seen in 2013. However, the uncertainty related to the central bank and government attempts to tackle non-performing loans in the banking sector is a risks to the forecast.

“We forecast USD/INR to end the year at 67”, added Lloyds Bank.

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