USD/INR remained well supported last week, aided by the firmer Dollar last Friday. The Reserve Bank of India (RBI) could provide some support to the Rupee is signals more rate hikes at this week’s meeting, economists at Commerzbank report.

RBI set to hike further

“The latest S&P Global services PMI for January for India remained strong at 57.2. The report noted new businesses during January which is helping to offset the slowdown in external demand. The other side of the coin however is that cost pressures remain firm. This is consistent with sticky core inflation, excluding food and energy. As such, RBI can’t afford to pivot too early to a neutral tone as yet.”

“We expect RBI to hike by another 25 bps to 6.50% this Wednesday and probably stick to a relatively hawkish bias.” 

“Suggestions of more hikes from RBI could provide some support for INR.”