According to a Reuters poll, the Reserve Bank of India (RBI) will utilize its foreign exchange reserves to control volatility and maintain the Indian rupee reasonably robust, therefore the currency will only slightly appreciate versus the US dollar during the next three months.
The rupee has decreased by less than 0.5%, whereas other emerging market currencies have appreciated vs the US dollar this year. The rupee has fluctuated within a narrow range of 82.64/$ to 83.45/$.
The RBI's ongoing involvement in the foreign exchange markets has been a major factor in this stability. It just reached a record high of $642.63 billion in foreign exchange reserves.
In contrast to USD/Asia, volatility has been restrained by the RBI's two-way FX intervention to maintain the rupee's stability. When feasible, the RBI has been increasing its foreign exchange reserves, which are currently at a record high, according to Dhiraj Nim, an ANZ forex analyst.
It sees them as its first line of protection against outside shocks, not the currency rate. We anticipate that the rupee would rise somewhat by 2024 and that this tendency will continue."
Based on a Reuters survey conducted from March 28 to April 3, 46 foreign exchange analysts predicted that the rupee will appreciate little to 83.11/$ in one month and 82.90/$ in three months, from Wednesday's rate of 83.43/$.
This prognosis has not been impacted by the relative strength of the US dollar thus far this year, and it has been virtually stable for several months.
This week, the repo rate is anticipated to remain constant by the RBI, with a reduction in the third quarter. It is generally expected that the US Federal Reserve will begin lowering US borrowing prices in June.
However, there's a growing chance that the Fed may not only lower rates later than anticipated, but also less frequently than anticipated. Aditi Gupta, an economist at Bank of Baroda, stated that "a further pushback in the Fed's rate-cut cycle beyond June will be the key risk to INR (Indian rupee) trajectory."
"Growth (in the U.S.) has been holding up, which may lead the Fed to delay its rate-cut cycle, which will make the case for a stronger dollar in the near term." Nevertheless, gains of about 1.1% to 82.50/$ in six months and 1.7% to 82.00/$ in a year were predicted for the rupee.
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