India Rupee Forecasts Cut, RBI May Tolerate Modest Weakness: UBS

Rupee likely at 66/USD by end-2015 vs 63 previous forecast; 68 at end-2016 vs prior forecast of 65, UBS strategists including Edward Teather write in note.

  • Say RBI may be willing to tolerate modest rupee weakness as part of policy easing process
  • Key risks are that the pace of currency weakness becomes self-reinforcing or inflation outcomes and expected inflation are not as benign; if those risks do not play out, expects RBI to cut its repo rate another 75 bps by end- 2015
  • USD/INR down 0.1% to 63.7363

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