Stronger dollar and rising concerns regarding the Omicron variant has driven the USD/INR back to above 75. Economists at Société Générale expect the pair to trade within a 75-77 range over 2022.

Rupee’s downtrend to linger in the medium-term

“In the medium-term, we expect the trend weakness vs the dollar to persist, as market expectations of a Fed rate hike increasingly gain momentum. However, we expect FX volatility to remain low, as the RBI’s own policy normalisation should mitigate some FX risks.”

“Equity flows, IPO-related flows and a prospective bond index inclusion should all remain supportive of the currency. We expect range-bound price action for the INR next year (75-77).”