Indian Rupee: Range-bound with RBI support against US Dollar – Commerzbank

Commerzbank FX analysts Charlie Lay and Moses Lim see USD/INR staying broadly stable as the Reserve Bank of India (RBI) keeps the policy repo rate at 5.25% and remains in wait-and-see mode. The pair has traded between 94.00 and 97.00 since May, with forecasts pointing to a gradual drift lower toward 93.2 by December 2027, supported by strong FX reserves and past USD deposit inflows.

RBI on hold, rupee range intact

"The economy is holding up well, supported by firm domestic demand and encouraging export growth. Although growth is expected to moderate this year, it is still projected to expand by 6.7% for the current fiscal year 2026-2027 compared to 8% for the previous fiscal year."

"Inflation remains stable and RBI is projecting 5% for the current fiscal year, which is within RBI's 2-6% target range. RBI is in a wait-and-see mode and is expected to stay comfortably on hold at 5.25% this year."

"RBI's measures to attract foreign capital and stabilize INR have been successful. It will close the Foreign Currency Non-Resident (Bank) or FCNR(B) deposit scheme one month ahead of schedule on 31 August."

"INR remains susceptible to a rise in global crude oil and gold prices. However, FX reserves have climbed back above USD700bn and this gives RBI greater capacity to smooth volatility if pressures return."

"USD/INR has remained within the 94.00-97.00 range since May, as sizable capital inflows have strengthened the balance of payment position and raised RBI's capacity to manage FX volatility. INR remains vulnerable to a rise in global crude oil and gold prices. RBI will likely lean on spot and forward FX intervention to smooth volatility if pressures return."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)