The USD/INR exchange rate has retraced to the lower boundary of the 82.70-83.50 range observed since the beginning of the year, prompting economists at Commerzbank to scrutinize the pair’s outlook.
Continued Strong Growth Momentum
Commerzbank analysts highlight the sustained robust growth momentum reflected in the latest S&P Global preliminary PMI reports for both manufacturing and services. The manufacturing PMI for February demonstrated a marginal increase, reaching 56.7 compared to 56.5 in January. Similarly, the services PMI saw a slight uptick, reaching 62 from the previous 61.8. Importantly, both readings comfortably surpass the crucial 50 threshold, with services exhibiting particularly noteworthy strength.
Examining forward-looking indicators such as new orders, the analysis reveals few indications of an impending slowdown, suggesting that the economic vigor is poised to persist.
Positive Implications for the Reserve Bank of India (RBI)
The robust economic backdrop aligns with the objectives of the Reserve Bank of India (RBI), offering welcome news. The nation’s economy remains firmly grounded, and headline inflation is projected to stay below the upper limit of the 2-6% target range. The confluence of strong growth and steady interest rates contributes to the stabilization of the Indian Rupee (INR).
As the USD/INR exchange rate finds itself at the lower end of the established range, the favorable economic conditions outlined by Commerzbank analysts suggest a landscape conducive to stability in the Indian economy and its currency.
