USD/INR likely to trade around 67 by end-2017

The USD/INR pair has not yet reversed its losses since February, owing to heightened risk appetite and lower crude oil prices. Year-to-date the INR is almost 6 percent stronger against the U.S. dollar. A reversal in recent gains is expected as the year progresses, noted Lloyds Bank in a research report.

This is mainly as the RBI is likely to keep a relatively more dovish stance as India’s inflation is now below target. Also, an intervention is expected to pick-up pace as the central bank looks to further build foreign exchange reserves. India’s foreign exchange reserves rose by USD 3.7 billion in April.

However, a formal inflation-targeting regime instated at the beginning of 2015 greatly reduces the chance of a sharp decline like the one seen in 2013. However, there is uncertain regarding the RBI and government attempts to tackle non-performing loans in the banking sector.

“We forecast USD/INR to end the year at 67”, added Lloyds Bank.