Despite India’s grim health situation, the exchange rate has managed to recover quickly from the nearly 4% slump it experienced against the US dollar in late March. The timely and ample response by the Reserve Bank of India has reassured domestic markets of solid policy support amid the crisis, taking the currency back on its feet. Moreover, with the exchange rate pinned as a fundamental tool to manage outsized inflation pressures, the RBI hasn’t been shy about intervening in the FX market via dollar swaps, suppressing the downward dynamics in the rupee. Still, the chaotic health situation puts the country in a horrendous position while also threatening the pace of the global economic recovery as a whole. Looking forward, we believe the INR outlook is poised to remain stable with a slight appreciation bias against the US dollar, but risks to this view remain strongly tilted to the downside.
Read our latest INR Outlook in full here:
Author: Olivia Alvarez Mendez, FX Market Analyst