Indian Rupee: RBI stance and inflows support Rupee – BBH

Brown Brothers Harriman’s (BBH) Elias Haddad reports USD/INR is firmer after recently testing a one‑month low, following the Reserve Bank of India’s (RBI) unanimous decision to keep its policy rate at 5.25% and maintain a neutral bias. Positive real rates, active RBI FX intervention, and strong capital inflows since June are seen as supportive for the Indian Rupee over coming months.

Stable policy with supportive capital inflows

"USD/INR if firmer after testing a one-month low near 94.9225. As was widely expected, the Reserve Bank of India (RBI) decided unanimously to keep the policy rate at 5.25% for a fourth consecutive meeting."

"The RBI maintained its neutral bias pointing out that the risks to growth and inflation are evenly balanced. The RBI projects real GDP growth of 6.4% in Q2 (up from 6.3% previously) and 6.5% in Q3 (unchanged), while core inflation is anticipated to decline after peaking in Q3."

"Bottom line, positive real rates, RBI intervention to strengthen INR, and measures announced in June to bolster capital inflows bode well for INR."

"According to the RBI, India’s push to attract overseas capital has brought in nearly $41 billion since June, covering almost twice India’s current account deficit."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)