Experts Caution Limited Rupee Appreciation Despite Positive Foreign Inflow Outlook

According to recent reports and analyst predictions, hopes are high that India’s rupee will experience a rebound as foreign inflows increase. However, experts caution that the Reserve Bank of India (RBI) may limit any significant appreciation due to its aim to maintain currency stability and the government’s concern over the impact on exports. MUFG Bank Ltd. anticipates a gain of less than 2% to 82 per dollar by year-end, while Australia and New Zealand Banking Group Ltd. expects little change. The RBI’s tight control over the rupee has kept it one of Asia’s least volatile currencies during a turbulent year for foreign exchange markets. Some investors believe that India’s inclusion in JPMorgan Chase & Co.’s bond index may attract up to $30bn in inflows, while Goldman Sachs Group Inc. forecasts increased foreign interest in Indian equities if Narendra Modi wins the current election. Traders are monitoring April consumer-price inflation data, which will provide insight into future monetary policy decisions. The RBI has kept interest rates unchanged for seven consecutive meetings, with officials emphasizing the need for inflation to fall sustainably to 4%.