Indian rupee range-bound despite weaker US dollar, set to trail most Asian peers: Reuters poll
BENGALURU (Reuters) -The Indian rupee will trade in a narrow range over the next six months as global risk-off sentiment slows capital inflows to a trickle, potentially offsetting gains from a weaker U.S. dollar, a Reuters poll of FX analysts showed.
Despite the dollar index falling nearly 11% so far this year, the rupee has remained largely stable. The Reserve Bank of India has been shoring up its reserves to near record levels to limit volatility and to meet dollar obligations when needed.
Foreign portfolio investors have been net sellers of Indian assets this year.
Most strategists in the June 30–July 2 Reuters poll said they did not expect the rupee to make any meaningful gains. This comes even as global investors sell American assets over concerns rising debt levels in the world's largest economy are unsustainable in the long run.
In three months the rupee is forecast to be down around 0.1% from current levels at 85.75 per dollar. It is then expected to trade at 85.50 in six months and weaken marginally to 86.13 in a year, according to the median forecast of 41 FX strategists.
"The overall trend for USD/INR should be downward, with the Fed cutting rates, the dollar index falling and possibly a breakthrough on the U.S. trade deal in the coming days," said Anil Bhansali, head of treasury at Finrex Treasury Advisors.
"It's going to be a slow and steady journey for the rupee because the RBI is currently buying dollars to meet its liabilities."
U.S. President Donald Trump said on Tuesday a trade deal could be reached with India.
The rupee has been a laggard compared to most regional peers, down around 0.1% for the year. The Korean won, Thai baht, Malaysian ringgit and Singapore dollar have gained more than 5%.
However, the RBI's recent policy stance shift to "neutral," signalling the end of its brief rate-cutting cycle, may help underpin the currency.
"(Given) better growth prospects, with a lot of monetary and fiscal stimulus being front-loaded and the expectation India might end up benefiting on the trade front compared to peers, there is a case for the rupee to somewhat appreciate from where we are today," said Sakshi Gupta, principal economist at HDFC Bank.
(Other stories from the July foreign exchange poll)
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