At record highs, USD/INR is trading sideways since its rise above 70 in mid-August, easing back to 69.91 last Friday as US Federal Reserve Chairman Jerome Powell confirmed a “slow and gradual” pace of rate hikes, thus softening the USD. Additionally, trade talks between China and the US contributed to a risk-on sentiment.
To publish on Friday, Indian Q2 GDP is expected to remain solid and above the 7% range (prior: 7.70%) off a weak base from last year. The Reserve Bank of India (RBI) will most certainly maintain its hiking path, raising interest rates to 6.75% by the end of the year after two rises of 0.25% in 2018. As industry remains solid due to strong domestic demand, inflation continues to accelerate, which points to further tightening by the end of the year. We expect the rupee to benefit. Key risks for INR remain its sensitivity to increasing energy prices as well as global risk-off sentiment. USD/INR is expected to trade sideways along 70 in the short-term.
By Vincent Mivelaz
