Bias: The USD/INR is bullish-to-range-bound, trading above the 90-day average and in the upper half of the last 3-month range.
Key drivers:
- Rate gap: The Federal Reserve is expected to ease rates gradually, while the Reserve Bank of India shows a commitment to stabilizing the rupee through intervention.
- Risk/commodities: Recent increases in oil prices can place additional pressure on the Indian Rupee as higher oil costs impact India’s trade balance and inflation.
- Trade deficit: India's significant trade deficit has created downward pressure on the rupee, while geopolitical tensions add to the uncertainty surrounding its performance.
Range: The USD/INR is likely to remain in a stable trend, potentially testing the recent highs based on current market dynamics.
What could change it:
- Upside risk: A stronger-than-expected U.S. jobs report could increase demand for the USD.
- Downside risk: Any unexpected developments regarding U.S.-India trade negotiations may weaken the rupee further.