INR/USD Outlook:
Slightly weaker, but likely to move sideways, as the rate is just below its 90-day average and shows limited clear drivers.
Key drivers:
- Rate gap: The Reserve Bank of India has a lower key interest rate than the Federal Reserve, creating pressure on the INR relative to the USD.
- Risk/commodities: Recent oil price volatility, influenced by global supply issues, continues to put pressure on India’s current account deficit, affecting the INR.
- Weak manufacturing exports: Slowing growth in manufacturing exports amid global demand challenges is also negatively impacting the INR.
Range:
The INR/USD is expected to hold within its recent range, with potential to drift rather than test extremes.
What could change it:
- Upside risk: A significant improvement in India’s foreign investment inflows could strengthen the INR.
- Downside risk: Continued geopolitical tensions or further tariffs on Indian exports could exert more pressure on the INR.
