Indian Rupee: Policy support limits downside risks – Commerzbank
Commerzbank’s Charlie Lay and Moses Lim note that the Indian Rupee has weakened sharply versus the Dollar in 2026 on higher Oil prices, portfolio outflows and a stronger USD. They highlight RBI’s preference for capital-inflow measures over aggressive rate hikes, and expect a 25bp policy increase later this year as inflation rises and USD/INR trades in a broad 94.50–96.00 range.
RBI leans on inflows over rate hikes
"While inflation risks have increased, RBI has opted to support INR through measures to attract foreign capital inflows rather than higher interest rate. We expect RBI to raise rates by 25bp to 5.50% later this year as inflation pressures build."
"On monetary policy, RBI voted unanimously to leave the policy repo rate unchanged at 5.25% in early June and maintained its neutral policy stance. RBI is likely to remain cautious in the near term as it assesses the impact of the Middle East conflict and weather-related risks on growth and inflation. However, the balance of risks has shifted towards tighter policy, and RBI appears closer to a rate hike than a rate cut."
"INR has come under significant pressure from higher oil prices, portfolio outflows, and a stronger USD. INR is down around 6% against the dollar year-to-date. It touched a record low of just below 97.00 in May."
"USD/INR has moderated to the 94.50-96.00 range. While INR remains one of the weaker Asian currencies this year, India's FX reserves remain substantial at around USD689bn, equivalent to roughly 10 months of import cover. Together with ongoing RBI intervention and prospective capital inflows, this should help contain excessive currency weakness in the near term."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Federal Reserve meeting minutes: All 19 policymakers support a rate hike in September, but reasons vary; most expect further hikes this year, suggesting no urgency in October.
Most officials view a September interest rate hike as an "insurance" measure against stubborn inflation; a minority see it as a necessary step to curb inflation. Overall, there is no indication of a desire to push for consecutive rate hikes. The "New Fed News Agency" emphasized the minutes: "Most participants believe that it may be appropriate to raise interest rates again before the end of the year." Nearly all officials believe inflation remains elevated and the labor market is close to full employment. Many noted that, despite the rise in long-term U.S. Treasury yields, financial conditions are still conducive to economic growth. Some officials believe that AI will boost investment and productivity, but may also contribute to inflation. The minutes revealed that the U.S.-Japan joint intervention in July to support the yen was a U.S. Treasury action, with no Federal Reserve funds used.
Solana Consolidates After Sharp Expansion
FLOKI Recovery Tests Key Resistance
100 Million Barrels Shrinkage? Reports Say EU Believes Oil Reserve Release Plan Mainly Fulfills Previous Commitments, Not New Quotas
Last Friday, G7 member countries agreed to release up to 100 million barrels of crude oil and diesel reserves. The IEA had announced a plan to release 400 million barrels in March, and as of last Friday, about 75 million barrels had yet to be released. Most EU member states believe that this action is simply fulfilling previous commitments rather than adding new releases. Regarding the earlier-than-scheduled release of diesel stocks emphasized in last week's G7 agreement, EU member states consider it feasible, but on a limited scale.
Crypto prices
More
