The Indian Rupee (INR) steadied on Thursday after hitting a record low in the previous session, as traders remained cautious ahead of the Reserve Bank of India’s (RBI) interest rate decision. Despite the pause in its decline, the currency remains under pressure due to expectations of a rate cut and broader weaknesses across Asian currencies. Additionally, uncertainties over U.S. trade policies and continued foreign portfolio outflows are weighing on the INR.
The RBI’s routine intervention, including selling U.S. dollars through state-run banks, may help contain further depreciation. However, all eyes are on Friday’s policy meeting, where the central bank is expected to cut rates for the first time in nearly five years. Market participants will also analyze the statement from newly appointed RBI Governor Sanjay Malhotra for insights into the future direction of monetary policy.
RBI Expected to Cut Rates Amid Economic Concerns
Analysts widely anticipate that the RBI will lower the benchmark repurchase rate by 25 basis points (bps) to 6.25%. The decision aligns with the central bank’s efforts to support domestic growth, particularly amid delays in U.S. tariff implementations.
“The delay in implementation of universal tariffs by the incoming U.S. administration provides some tactical space for RBI to prioritize domestic growth… and space to cut policy rates,” said Ruhul Bajoria, an economist at Bank of America in India.
A Bloomberg survey shows that most economists expect the RBI to proceed with the 25-bps rate cut. Meanwhile, global monetary policies remain a key factor, with Chicago Fed President Austan Goolsbee cautioning against aggressive rate adjustments due to economic uncertainty. Dallas Fed President Lorie Logan added that while inflation has eased, the robust U.S. labor market suggests the Federal Reserve is unlikely to cut rates in the near term.
USD/INR Maintains Upward Bias, Technical Indicators Signal Caution
The Indian Rupee traded flat on Thursday, with the USD/INR pair holding above the key 100-day Exponential Moving Average (EMA) on the daily chart. The currency pair remains in a bullish trend, but the Relative Strength Index (RSI) has entered overbought territory above the 70.00 mark, suggesting a possible short-term pullback or consolidation.
Immediate resistance for USD/INR stands at 87.62, the record high. A decisive move above this level could push the pair toward the psychological barrier of 88.00. Conversely, support lies in the 87.00-87.05 zone, with a break below potentially dragging the exchange rate down to 86.51, the February 3 low.
As traders brace for the RBI’s decision and key U.S. labor market data, including Nonfarm Payrolls and Average Hourly Earnings, volatility in the currency market is expected to persist.
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