- Summary:
- The Indian Rupee (INR) traded weaker at ₹83.92 per USD on Tuesday. The demand for the USD from corporations and local banks...
The Indian Rupee (INR) traded weaker at ₹83.92 per USD on Tuesday. The demand for the USD from corporations and local banks throughout the month-end and a rally in crude oil prices will likely limit the rupee’s gains. Conversely, the pair’s upside might be limited because of Fed Chair Jerome Powell’s negative remarks, which have caused the possibility of a more prominent rate cut in the September meeting.
We expect the rupee to trade with a slight positive bias on risk in global risk sentiments amid dovish Fed speak and rising expectations of a rate cut by the Fed in September. However, geopolitical tensions in the Middle East and rising crude oil prices may cap the sharp upside,”
said Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas.
The Indian economy is struggling with domestic challenges, with Inflation remaining a major concern caused by rising fuel prices. The Reserve Bank of India (RBI) has been carefully increasing the interest rates to manage inflation, which also impacts economic growth prospects. High interest rates may attract foreign investment and support the rupee, but they can also slow local economic activity.
A positive outlook on the Indian Rupee
On an upbeat note, India’s robust foreign exchange reserves, valued at around $600 billion, provide a buffer against currency volatility. Substantial foreign direct investment and a recovering economy post-pandemic have helped somewhat regulate the Rupee.
The Rupee’s performance depends on a delicate balance of domestic economic policy and global economic conditions. The rupee remains a focal point for investors and policymakers as India navigates its economic recovery amidst global uncertainties.