Currency overview 2019-20
1) Oil prices seen easing through most of this year.
2) There would be good capital inflows. However, RBI may not absorb as much into the reserves, given that their draw-down in FX reserves last year was relatively low.
3) Most of the headwinds of INR weakness of last year not expected to be present this year.
4) Election results would be important as inflows would increase substantially if there is a majority government. Continuation of present government would bolster expectations of economic reforms by the international community and substantial investments.
5) A pause in Fed Rate hiking cycle may outweigh local concerns.
6) Increased growth and benign inflation numbers expected.
7) Macro economic reforms and developments expected to yield positive results.
8) Risks remain of heightened trade war between US-China and resultant fallout in the Asian markets.
Overall, the rupee is expected to range between 68-72 levels through the year, with a bias towards rupee strengthening against the USD. Major strength should be seen post elections if the ruling party gets re-elected, either by majority or coalition. On the other hand, a defeat of the ruling party may weaken the equity and the rupee substantially , with upside risks running to 74 to the dollar.