India’s addition to the US Treasury’s monitoring list for currency manipulation makes it more likely the Reserve Bank of India (RBI) will give freer rein to the rupee when it rises against the dollar, analysts say.
India increased its purchases of foreign currency last year and has a “significant” trade surplus with the US, the Treasury noted in its semi-annual report on foreign-exchange practices released in Washington on Friday. The rupee has been the second-worst performing Asian currency this year, dropping 2.3% against the dollar, after strengthening 6.4% in 2017.
Here’s what analysts made of India’s addition to the US Treasury’s FX watchlist:
Less Intervention
Craig Chan, global head of EM currency strategy at Nomura Holdings Inc.:
Khoon Goh, head of Asia research at Australia & New Zealand Banking Group Ltd.:
Heng Koon How, head of markets strategy, and Alvin Liew, senior economist, at United Overseas Bank Ltd.:
Fleeting Appearance
Divya Devesh, Asia FX strategist at Standard Chartered Plc:
India will likely drop off the monitoring list in the coming year, given a probable widening of the current-account shortfall and more modest capital inflows reducing reserves accumulation
Being on the U.S. watchlist may not exert a significant impact on the rupee, apart from an initial reaction
— With assistance by Lilian Karunungan, Subhadip Sircar, and Yumi Teso