The Indian Rupee (INR) has recently faced significant challenges against the U.S. Dollar (USD), attaining a record low of 88.36 INR per USD amid mounting pressures from U.S. tariff actions and substantial foreign portfolio outflows. Analysts have pointed to the imposition of a 50% tariff on key Indian exports as a crucial factor impacting the INR, further straining U.S.-India relations. The Reserve Bank of India (RBI) has intervened in the foreign exchange market to support the rupee by selling dollars, aiming to limit further depreciation. Despite these measures, foreign investors have withdrawn over $1.4 billion from Indian equities in September, contributing to a broader outflow exceeding $16 billion for the year.
In the context of future forecasts, a Reuters poll indicates that the INR is expected to stabilize, with projections suggesting a slight recovery to around 88.04 by the end of September and approximately 88.00 in the subsequent year. This assessment reflects the market's belief that the recent lows may not sustain, and the INR could avert further significant declines in the near term.
On the USD front, the currency has traded within a narrow range, remaining largely unaffected by the latest inflation data that reached a seven-month high. Despite this inflationary pressure, the market is pricing in potential interest rate cuts by the Federal Reserve extending into 2025, hinting at a cautious approach from USD investors. The upcoming publication of consumer sentiment metrics could inject some volatility into USD trading, as a modest decline in sentiment might prompt selling pressure.
The USD/INR exchange rate has been trading at 90-day lows near 0.011328 INR per USD, approximately 1.6% below the three-month average of 0.011509. This relative stability, within a 3.4% range, signifies a constrained but watchful environment for forex investors. The interplay of U.S. economic policies, including rising inflation and potential changes in leadership at the Federal Reserve, will likely underpin future movements in the exchange rate between the two currencies.
