USD/INR remained well supported in the past month due to the firm USD and elevated oil prices. At its recent meeting, the Reserve Bank of India (RBI) signaled an intention to gradually withdraw excess liquidity over the coming year. This should alleviate downside pressure on the rupee.

RBI sets the stage to begin liquidity withdrawal

“The withdrawal of liquidity and prospects of RBI rate hikes in the second half of this year could provide some support for INR. It should at least mitigate INR’s weakness against the backdrop of further Fed rate hikes this year.”

“We see USD/INR holding within the 75-77 range near-term.”