USD/INR Outlook:
Slightly positive, but likely to move sideways as the rate is just above its recent average and influenced by mixed drivers.
Key drivers:
- Rate gap: The Federal Reserve's decision to hold interest rates steady is contrasting with the Reserve Bank of India's flexible approach, impacting the USD/INR exchange rate.
- Risk/commodities: The ongoing geopolitical tensions and trade issues have prompted a cautious approach among investors, affecting the demand for both dollars and rupees.
- One macro factor: Persistent foreign portfolio investment outflows from Indian markets due to global economic concerns are putting pressure on the INR.
Range:
The USD/INR is likely to drift within the recent stable range, testing both upside and downside extremes.
What could change it:
- Upside risk: A stronger-than-expected US non-farm payroll report could elevate the USD further.
- Downside risk: Continued pressure from India's current account deficit and weak export performance could weaken the INR significantly.
