The USD to INR exchange rate has recently experienced substantial volatility influenced by both domestic and international factors. The US dollar faced downward pressure due to concerns regarding the Federal Reserve’s independence amid leadership changes and potential interest rate cuts. As analysts noted, the Fed's possible decision to lower rates could further devalue the USD, which had already slipped to multi-month lows against other currencies.
Simultaneously, the Indian rupee has depreciated significantly, reaching a record low of 88.36 against the dollar earlier this month. The weakness of the INR can be attributed to new U.S. tariffs on Indian goods and considerable foreign portfolio outflows, with investors retracting $1.4 billion from Indian equities this September. Despite this, a recent Reuters poll suggests that the INR is unlikely to extend its declines in the near term, predicting stabilization around 88.04 by the end of September.
The Reserve Bank of India has actively intervened in the markets to stabilize the rupee, selling dollars to cap further depreciation. Given the recent price data, where the USD to INR is at 14-day lows near 87.89, this level is notably 1.1% above its three-month average of 86.99, indicating a relatively stable range from 85.41 to 88.28 over the past few months.
In summary, the current outlook suggests that both currencies are under pressure from different angles, with the USD facing potential rate cuts and the INR battling trade-related headwinds and outflow concerns. Market experts recommend observing upcoming economic data closely, as any significant shifts could influence these trends.
