USD/INR has recently revisited 2020 highs following Russia’s invasion of Ukraine. Economists at Credit Suisse still think that the central bank will pursue a “weak rupee” policy. Accordingly, they revise their Q2 USD/INR forecast range to 75-78.

RBI’s “new” intervention line will be held at the 75.00 level

“We remain optimistic on the outlook for Indian GDP, but that optimism (and associated high investment and consumption) amid re-opening is actually negative for India’s trade balance and INR. We think the RBI will likely allow consumption and imports to ‘run hot,’ putting weakening pressure on the rupee.” 

“Over time the RBI’s ‘permitted’ USD/INR trading range (which we currently think is 75-78) will shift higher; rising inflation points to a weaker rupee to offset lost competitiveness from higher wages. As such, we think the RBI will continue accumulating FX reserves, and will likely limit INR strength. We suspect that the RBI’s ‘new’ intervention line will be held at the 75.00 level.”