The case for the Reserve Bank of India (RBI) to focus more on growth and less on inflation continues to strengthen, Commerzbank’s FX analyst Charlie Lay notes.
USD/INR can hold below 84.00 in the near term
“August inflation held below RBI’s mid-target of 4% for the second consecutive month at 3.7% yoy vs 3.6% in July. It has averaged 4.6% year-to-date, which is within RBI’s 2-6% target range. Core inflation, which strips out food and energy, also remained well-behaved. It was unchanged from July at 3.4% yoy in August. Year-to-date, it has moderated to 3.3%, down sharply from 5.1% in 2023, partly due to RBI’s restrictive stance.”
“Given that inflation is contained, signs of moderation in growth, albeit still relatively firm, and expectations of Fed rate cuts in the coming months, there is a case for RBI to consider shifting to a neutral stance. They could do so either in October or December. One other key determinant will be continued INR stability. INR has been the currency of stability in Asia this year.”
“In the first six months of the year, INR was down just 0.2% against the USD vs the average for Asian currencies of -4.2%. Since the end of June, Asian currencies have rallied sharply due to the weaker USD. They gained by 4.9% on average while INR is down 0.6% vs USD. INR has not experienced the sharp swings that the rest of the Asian currencies have, and this has been a deliberate policy from RBI. We could see this continuing and USD/INR could hold below the 84.00 level in the near term.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD holds steady near 0.6250 ahead of RBA Minutes
The AUD/USD pair trades on a flat note around 0.6250 during the early Asian session on Monday. Traders brace for the Reserve Bank of Australia Minutes released on Tuesday for some insight into the interest rate outlook.
USD/JPY consolidates around 156.50 area; bullish bias remains
USD/JPY holds steady around the mid-156.00s at the start of a new week and for now, seems to have stalled a modest pullback from the 158.00 neighborhood, or over a five-month top touched on Friday. Doubts over when the BoJ could hike rates again and a positive risk tone undermine the safe-haven JPY.
Gold price bulls seem non-committed around $2,620 amid mixed cues
Gold price struggles to capitalize on last week's goodish bounce from a one-month low and oscillates in a range during the Asian session on Monday. Geopolitical risks and trade war fears support the safe-haven XAU/USD. Meanwhile, the Fed's hawkish shift acts as a tailwind for the elevated US bond yields and a bullish USD, capping the non-yielding yellow metal.
Week ahead: No festive cheer for the markets after hawkish Fed
US and Japanese data in focus as markets wind down for Christmas. Gold and stocks bruised by Fed, but can the US dollar extend its gains? Risk of volatility amid thin trading and Treasury auctions.
Bank of England stays on hold, but a dovish front is building
Bank of England rates were maintained at 4.75% today, in line with expectations. However, the 6-3 vote split sent a moderately dovish signal to markets, prompting some dovish repricing and a weaker pound. We remain more dovish than market pricing for 2025.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.