USD/INR to advance nicely towards 76.80 by end-2022 – ING

The Indian rupee has lost about 1.8% versus the US dollar year-to-date in 2021. Economists at ING expect the INR to continue weakening next year and forecast USD/INR at 76.80 by end-2022.

At risk if the hot money turns cold

“Current inflation spikes are concentrated in seasonal foods and should pass but inflation will end the year pushing into the top half of the Reserve Bank of India's 2-6% target range and high energy prices could further worsen India’s current account and fiscal balance in 2022.”

“The economy has sufficiently improved such that we anticipate some reduction in accommodation beginning 1Q22, with the repo rate ending 2022 50bp higher at 4.50%.”

“Some have suggested that the successful IPOs of companies like Zomato in 2021 will open the floodgates to an even stronger pipeline next year, which would provide further INR support. But with the Fed possibly tightening as early as next year, the equity and IPO environment is likely to be much more challenged and we see the INR losing ground with USD/INR rising to 76.80 by end-2022.”