December 10, 2024 10:27 GMT
INR: Rupee Slips to Fresh Low on New Governor Appointment, Rate Cut Bets Rise
INR
USD/INR (+0.14%) reached a fresh record high following the appointment of Sanjay Malhotra as new RBI Governor. The pair has now gained around 0.9% since the start of November, nearly matching the entirety of the gains recorded in the 10 months prior to that. According to traders who spoke to Reuters, the RBI likely stepped in once again to support the currency.
- Outgoing Governor Das and Deputy Governor Patra (whose term expires in mid-January) were seen as the most hawkish members of the committee, and Malhotra’s appointment may therefore provide a dovish tilt to the Board. The new Governor’s views on FX policy will be closely watched moving forward, with Das’s helm of the RBI largely characterised by its active presence in currency markets to keep a lid on rupee volatility.
- DBS say, for now, “markets are likely to take the new appointment as dovish, raising the probability of a cut at the February policy meet.”
- On FX, HSBC’s strategists note that “a slightly faster pace of INR depreciation than seen in 2023 and 1H24 is already underway, and will likely to continue in 2025.”
- Goldman Sachs expect policy continuity and continue to expect a shallow easing cycle of 50bp, with 25bp rate cut each in the February and April MPC meetings.
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