USD/INR pair likely to trade around 65 by end-2017, says Lloyds Bank

In the past month, the USD/INR dropped to a multi-year low of 63.56, noted Lloyds Bank in a research report. A stable foreign exchange rate compared with other emerging markets, along with attractive yields and good economic growth prospects have sustained solid portfolio inflows. However, looking ahead, the Indian rupee is expected to pare back some of its recent gains, stated Lloyds Bank.

Firstly, higher commodity prices would increase India’s demand for U.S. dollars. India is particularly dependent on crude oil imports, which have increased in price since last year. Secondly, India’s banks and firms continue to wrestle with subdued balance sheets. This might easily support government reform efforts aimed at fostering investment. In turn, slower than anticipated economic growth might follow. Already some indicators point toward a deceleration in activity, albeit possibly due to one-off implementation of a national sales tax.

“We forecast USD/INR to end the year at 65.0”, added Lloyds Bank.

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