On Thursday, the Reserve Bank of India (RBI) kept its key interest rate on hold, against expectations of a 25 basis points rate hike. Analysts at Wells Fargo see the RBI on hold for the next months. They expect the Indian Rupee to underperform among emerging market currencies.
“The Reserve Bank of India (RBI) opted for a hawkish hold at its April meeting; however, mixed signals complicate the outlook for Indian monetary policy. We now believe the RBI will be on hold through Q3-2023, but is still on track to initiate an easing cycle in Q4 of this year.”
“With the RBI on hold and the Fed likely to deliver another 25 bps hike in May, expect the rupee to continue moving sideways in the short-term.”
“Over the longer-term, an aggressive Fed easing cycle and broad-based U.S. dollar depreciation should lead to rupee strength; however, we expect INR to underperform across the emerging market currency complex. On the other hand, we believe India's economy will be one of the important drivers of global activity and be responsible for an outsized contribution to global economic growth this year.”
“We forecast the USD/INR exchange rate to hover near INR82.25 through the end of the second quarter.”
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