USD/INR: Indian rupee underperformance not quite over – CIBC

Analysts at CIBC, see the USD/INR pair trading at 70.2 during the second quarter and at 68.9 on the fourth quarter. According to them, the Indian rupee will remain weak versus its regional Asian peers in the short-term. 

Key Quotes: 

“While KRW was the weakest-performing Asian currency in 2019 (-3.5% vs. USD), the INR was not far behind, giving up 2.5%. Yield adjusted, investors may have still come out ahead, but volatility and risks for further INR weakness, as the economy faltered, remained concerning.”

“Looking at 2020, we see risks of further underperformance, underscored by a still-soft growth outlook, and more concerningly by rising inflation, as CPI rose by 7.35% in December - a five-year high. That could lend to RBI tightening, which would hinder activity and raise questions concerning risks of stagflation. A better overall tone surrounding global trade should eventually provide support for the INR, but we continue to see INR as an underperformer versus its regional Asian peers in the nearterm.”