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MUFG expects India RBI decision to keep Asia FX volatile

MUFG says the RBI is likely to keep rates on hold on Oct. 7, but a December tightening cycle totaling 50 to 75 bps is probable.

Reported · Written up by our desk · Central Banks

MUFG analysts Lin Li, Michael Wan, Lloyd Chan, and Khang Sek Lee say Asia FX will be driven by the Reserve Bank of India’s decision on Oct. 7, describing it as finely balanced, according to FXStreet.

They expect the RBI to keep rates on hold, but they warn that a hiking cycle starting in December is likely. MUFG projects total tightening of 50 to 75 bps and expects the central bank to shift away from a neutral stance.

FXStreet also noted that AUD/USD bounced back toward 0.6950 in the Asian session, as traders reduced dollar exposure following the US dollar’s retreat from 17-month highs ahead of the US Nonfarm Payrolls report.

In the same market note, FXStreet said USD/JPY was struggling for fresh momentum near 158, while the Australian dollar drew support from revived expectations of a November interest rate hike amid elevated global yields and inflation risks.

Latest closeUSD/JPY 157.40 ▲0.0%

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