USD/INR forecast at 79.8 by the end of 2023 – MUFG
04.01.2023, 15:49

USD/INR forecast at 79.8 by the end of 2023 – MUFG

The Indian Rupee led declines among most emerging Asia currencies in 2022, slumping 10.9% year-to-date against the US dollar (as of December 15), point out analysts at MUFG. They expect the USD/INR pair to reach 79.8 by the end of 2023. Currently it is trading at 82.75.

Rupee boosted by India’s growth relative outperformance

“INR was the worst performing currency among its Asian peers this year due to resuming net portfolio outflows of foreign investments in India’s equity markets amid a strong dollar, even as India’s Nifty50 and Sensex were outliers in most stock market indices around the world sitting in red. Like other Asian currencies, US dollar remains in the driver seat for a higher USD/INR in next quarter. Having said that, the relative outperformance of India’s growth in 2023 compared with most of Asia economies, as well as that for US and Europe, alongside a sustained weaker dollar after 1Q23, funneling capital into Indian markets by foreigner should return, offering support to the INR.”

“The central bank likely delivers a final hike of 25bps at its next meeting in February 2023, lifting its repo rate to a terminal level of 6.50%. Notably, the real policy rate has turned positive, posing downside risks to economic growth. This also suggests that that peak of policy rate in this cycle is close to support the economy.”

“We see USD/INR rise to 82.3 in 1Q23 before getting back on the declining trek thereafter to reach 79.8 at end of 2023.”

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