The India Rupee strengthened slightly against the US Dollar in March. Economists at MUFG Bank expect the USD/INR pair to fal toward 79.50 by the end of the year. 

RBI likely to continue capping INR volatility through FX intervention

“We are reasonably sanguine on INR’s prospects, and expect USD/INR to start to benefit from a weaker US Dollar by end-2023 and decline to 79.50.”

“From a fundamental perspective, there are certainly some things to like, but with some risks to watch for. First, the current account deficit is narrowing faster than expected. Second, the government has committed to fiscal consolidation in its latest budget. Third, real yields are still positive. Fourth, equity outflows have stabilised. Lastly, exchange rate valuations are not exorbitant, given the meaningful decline in trade weighted exchange rate index since 4Q2022 last year.” 

“Moving forward, a key driver of the Indian Rupee will continue to be the RBI’s FX intervention strategy. The RBI seems to dislike excessive FX volatility, especially if it is driven by portfolio flows (in both directions).”