USD/INR has held mostly within the 81.00-83.00 this year, within a narrow 2.5% range. Economists at Commerzbank note that the Reserve Bank of India (RBI) seems content to adopt a stable INR policy.

It is too early to discuss rate cuts by RBI

“The economy is expected to moderate this year, from an estimated 7% for the previous fiscal year 2022-2023 to around 6.4%. This is still respectable growth and will be driven by the strong performance in the domestic sector, particularly the services sector.” 

“The good news for RBI is that inflation is also showing signs of peaking, with headline inflation dipping back to the 2-6% target range in April. This provides RBI scope to stay on hold for the foreseeable future. At the same time, it is too early to discuss rate cuts by RBI.”

“We expect RBI to keep rates on hold at 6.50% for the foreseeable future. This should provide some support for INR.”