China Economy - Period Of Surging USD Over, But India To Persist With Mildly Weaker NEER: ICICI Securities

We expect the RBI to prefer rebuilding foreign exchange reserves over the next half year, keeping INR in the 81.5-82.5/USD range,

<div class="paragraphs"><p>China people, economy. (Photo: Javier Quiroga /Unsplash)</p></div>
China people, economy. (Photo: Javier Quiroga /Unsplash)

BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.  

ICICI Securities Report

Having appreciated by 19.1% YoY at end-October 2022 in trade-weighted terms, the U.S. dollar has shed some of that strength this month – marking a decisive shift, in our view, as the Eurozone in particular is obliged to raise interest rates much more aggressively than the U.S. Fed over the next half-year.

A stable or mildly-weaker U.S. dollar buoys emerging economies, but India is likely to take the opportunity to regain some competitiveness relative to the Europe, Japan and Korea (whose currencies have depreciated sharply against Rs in March-October 2022).

Accordingly, India’s foreign exchange reserves grew by $20.2 billion in the three weeks ending Nov, 11 2022 to $544.7 billion (albeit still $88.9 billion lower than at end-CY21).

We expect the Reserve Bank of India to prefer rebuilding foreign exchange reserves over the next half year, keeping Indian rupee in the 81.5-82.5/U.S. dollar range, thereby also weakening against euro, Japanese yen,  Korean won and British pound sterling (as they regain some of the ground they’d lost to the U.S. dollar in the year-to-date).

This will ensure that India’s nominal effective exchange rate depreciates 1-2% YoY over the next half-year, even as the Indian rupee/U.S. dollar rate stays broadly stable.

Click on the attachment to read the full report:

ICICI Securities China Economy NEER.pdf


This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.