September 26, 2023
London, UK

USDINR Steady After RBI Interest Rate Hike


USDINR is trading unchanged after the central bank of India (RBI) six-member Monetary Policy Committee delivered the third 50 basis point interest-rate hike in its attempt to battle inflation in the country while targeting to protect the economy amid fears of a global recession. The repo rate hike was broadly expected by markets. Now the repo rate has reached 5.90%.  

The Reserve Bank of India’s Governor Das in his press conference after the policy decision said that interventions in the forex markets are to maintain economic stability and the adequacy of fx reserves and added the Indian rupee moves have been orderly compared to other emerging and developed countries currencies.  RBI also lowered its real GDP projection for 2022-2023 to 7% from 7.2% in August, while the forecast for inflation remains at 6.7%.

According to forex analysts, RBI has been selling dollars regularly to manage the pace of INR decline.

A strong dollar index (DXY) over the last months, high inflation rate, rising interest rates and a deteriorating economic outlook continue the pressure on the Indian rupee despite the Reserve Bank of India‘s active FX intervention.

I expect the hawkish FED and its aggressive stance to fight inflation would keep the pressures on developed and emerging currencies. RBI is also expected to continue the rate hikes.

The S&P BSE Sensex Index today finished 1.82% higher at 57,440, U.S. futures trade on a positive foot in the early morning after yesterday’s sharp losses. The U.S. dollar index (DXY) is trading 0.34% lower today at 111.55.

USDINR Technical Analysis

USDINR trades almost unchanged today after the RBI policy decision at 79.65. The USDINR pair is 9.48% higher since the beginning of the year(YTD). The bulls are in full control of the pair and further gains can’t be ruled out as long as the pair trades above the 50-day moving average. Resistance stands at 81.71 the daily high. The all-time high at 82.005 is the next strong resistance which if breached would move the pair to unchartered territory.   

On the flip side, minor support stands at 81.16 the daily low. The next level to watch on the downside is the low from September 23 at 80.78. A break below might lead the way for a move down to 80.20 which is the low from September 22 trading session.  

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