USD/INR to advance nicely towards $75.00 by end-2021 – CE

Analysts at Capital Economics expect the Indian rupee to depreciate against the US dollar in the coming months as the US Treasury yields are set to continue rising. 

Key quotes 

“With US Treasury yields now looking set to rise further over the coming couple of years, we expect the US dollar to appreciate further against most DM and EM currencies.” 

“We are now forecasting the rupee to depreciate from 72.6/$ currently to 74/$ and 75/$ by the end of 2021 and 2022 respectively. Our previous forecasts implied a slight appreciation in the rupee over the next two years.”

“There should be limited economic fallout from a weaker rupee. The pass-through to inflation is small by EM standards. In addition, India has a very low burden of foreign currency debt. So at least the existing strains in the banking sector won’t be exacerbated by currency weakness.”