The USD to INR exchange rate has been influenced by several recent developments in the global economic landscape. The US dollar has gained strength, supported by a hawkish stance from the Federal Reserve, which has led to a reassessment of interest rate expectations. Although the Fed recently cut rates, Chair Jerome Powell indicated that further cuts are not certain. Analysts suggest this hawkish sentiment could sustain upward momentum for the US dollar, pushing the USD higher against various currencies, including the Indian rupee.
Simultaneously, key factors affecting the Indian rupee include a direct intervention by the Reserve Bank of India (RBI) to stabilize the currency, selling approximately $3 billion to $5 billion in the forex market. This action resulted in the rupee's most significant single-day appreciation in four months. Additionally, the INR has seen a positive shift in market sentiment, as evidenced by a substantial tilt towards rupee call options, marking the lowest risk-reversal level in over a decade.
However, ongoing challenges persist for the rupee, notably the impact of US tariffs on Indian exports and rising gold imports, which undermine the INR's stability. Recent tensions in US-India trade relations have further complicated the forecast for the rupee, leading to increased volatility in the exchange rate.
Current USD/INR levels indicate that the exchange rate is near a 14-day high at 88.63, which is approximately 0.6% above its three-month average. This relatively stable trading range of 2.1% demonstrates a noteworthy resilience in the face of external pressures. Analysts and economists are closely monitoring the interplay between ongoing Federal Reserve policies and RBI interventions, as these will significantly influence future exchange rate movements.
