AnalystsatCreditSuisseexpectaUSD/INRrangeof74.00-76.00inQ4withtheReserveBankofIndia(RBI)defendingbothsidestosmoothenvolatility.In2022,however,theythinktheRBIwilldropthe“redline”of76.00andallowmoreINRweakness.

Optimismiscontagious,butrupeestrengthisnotasideeffect

“WesharetheoptimisticconsensusviewamongeconomistsonIndia’sGDPoutlook.However,westillholdtheviewthatwhatisgoodforIndianGDPisactuallybadfortherupee.Wethinkrisingdomesticdemandandimportswillturnthetradedeficitmorenegative,pressuringINRweaker.”

“WeexpectaUSD/INRrangeof74-76inQ4.TheRBIwilllikelycontinuelimitingrupeestrength,keepingUSD/INRabove74.00.ConverselythecentralbankwillalsolikelylimitrupeeweaknessandkeepUSD/INRbelow76.00.”

“TheRBI’spreferenceforaweakerrupeepointstoUSD/INReventuallybreakingthrough76.00in2022,similartohowprior‘redlines’of60and68werebrokenin,respectively,2013and2018.”