A balance of payments surplus points to a stronger Rupee, but the RBI’s two-way FX intervention to keep the INR stable has capped volatility compared to USD/Asia. 

The RBI has been building up its foreign currency reserves, whenever possible, which are now at record highs. It believes them, not the exchange rate, to be its first line of defence against external shocks. We expect this trend to continue and the INR to gain modestly over 2024. However, once there is clarity around Fed rate cuts, the impetus for allowing the Rupee to appreciate could be stronger.