- The Indian Rupee is poised for a potential rebound, fueled by anticipated advancements in a trade accord between the United States and India.
- Downward movement in the USD/INR exchange rate might be limited by hedging activities from importers and possible interventions by the Reserve Bank of India (RBI) through dollar purchases.
- Upside for the INR could be challenged by rising crude oil prices, influenced by OPEC+’s decision to accelerate production increases.
The Indian Rupee (INR) experienced a slight depreciation against the US Dollar (USD) during Tuesday’s Asian trading session. Nevertheless, the USD/INR pair is likely to face continued resistance as the INR benefits from underlying market dynamics. Market participants are keenly awaiting the Federal Reserve’s upcoming policy announcements, alongside developments in US-India trade negotiations and geopolitical tensions. These factors are expected to play a crucial role in shaping the near-term trajectory of the currency pair.
The Indian Rupee received a boost from robust equity inflows, totaling ₹2,769.81 crore, indicating strong investor confidence in the Indian market. Additionally, the recent issuance of a new 10-year government bond, offering a coupon rate of 6.33%, was met with substantial demand, aligning with market forecasts. This positive reception could attract further foreign capital, providing additional support to the Rupee. The bond auction’s success reflects a stable macroeconomic environment and investor appetite for Indian government securities.
The potential for further declines in the USD/INR pair may be constrained by hedging demand from importers seeking to protect themselves against currency fluctuations, as well as potential interventions by the Reserve Bank of India (RBI) through strategic dollar purchases. The central bank is projected to maintain its efforts to augment its foreign exchange reserves, which have demonstrated a consistent upward trend for the past eight weeks, reaching a level of $688 billion as of April 25, marking a high point not seen in over six months. This level of reserves provides the RBI with significant firepower to manage exchange rate volatility and maintain financial stability. Furthermore, analysts suggest that the RBI may be aiming to build a larger buffer against potential external shocks, given the current global economic uncertainties.
