USD/INR: Patient and cautious monetary policy stance from the RBI to support the Indian Rupee – Wells Fargo
05.03.2024, 07:26

USD/INR: Patient and cautious monetary policy stance from the RBI to support the Indian Rupee – Wells Fargo

The Reserve Bank of India (RBI) is set to maintain a cautious stance on monetary policy. In the view of economists at Wells Fargo, delayed easing should support the Indian Rupee (INR) over time. 

Local politics should be a source of strength for the INR

A patient and cautious monetary policy stance from the RBI should be supportive of the Indian Rupee over time. The Federal Reserve is likely to cut policy rates before the RBI, which should support the Rupee through more attractive interest rate differentials. 

Our view for a Modi victory with a Lok Sabha majority should allow for broad-based policy continuity and further pursuit of reforms aimed at integrating India into the global economy and India's financial markets into the global financial system. Policy continuity should attract equity and debt inflows into India, and be supportive of the Rupee. 

Finally, economic outperformance, fiscal responsibility and debt consolidation, and easing political risk should offer a rationale for credit rating agencies to upgrade India's sovereign credit rating.

We see opportunity for the Rupee to strengthen over the longer term. As far as our long-term outlook, we believe the USD/INR exchange rate can strengthen to 82.00 by the end of 2024 and believe the foundation for Rupee strength to persist into 2025. By the middle of next year, we believe the USD/INR can move toward 81.00.

 

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