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USD/INR Exchange Rate Forecast Ahead of RBI Decision

The USD/INR exchange rate moved sideways on Monday as investors focused on the upcoming Reserve Bank of India (RBI) interest rate decision. It was trading at 81.23, where it has been in the past few days. This price is a few points below the year-to-date high of 83.31 and 10% above its lowest level in 2022.

RBI interest rate decision ahead

The USD/INR exchange rate has been under pressure ahead of the upcoming RBI decision scheduled for Wednesday. Economists polled by Reuters expect that the bank will continue hiking interest rates in a bid to fight the soaring inflation. Precisely, they expect that the RBI will hike rates from 5.90% to 6.25%. The reverse repo rate is expected to remain at 3.35% while the cash reserve ratio is expected at 4.50%. 

The RBI is not under intense pressure to keep hiking interest rates because inflation in the country has been relatively stable recently. In October, the headline consumer price index (CPI) dropped from 7.41 to 6.77, which was the lowest level in a few months. This inflation is at the bank’s target range. 

The Indian economy has done better than its emerging market peers recently. Data published last week showed that India’s GDP expanded by 6.3% in the third quarter after growing by double-digits in the previous quarters. 

The USD/INR price also wavered as investors reacted to the latest American non-farm payrolls (NFP) data. According to the Bureau of Labor Statistics (BLS), the economy added over 280k jobs in November while the unemployment rate remained intact at a historic low of 3.7%.

USD/INR forecast

The daily chart shows that the USD to INR exchange rate has been in a consolidation phase in the past few days. In this period, it has remained at 81.32, where it has been since last week. It is slightly below the 25-day and 50-day moving averages while the MACD has dropped below the neutral level. The price is above the ascending trendline shown in blue.

Therefore, the pair will likely continue falling as sellers target the key support level at 80. A move above the resistance level at 81.50 will invalidate the bearish view.