Commerzbank analysts highlight that USD/INR fell 0.5% to 95.71 and is down 0.3% on the week, as the Reserve Bank of India (RBI) intervenes in spot markets and tightens gold import rules. They note reports that Governor Sanjay Malhotra may consider a rate hike on 5 June, potentially complemented by USD bond issuance and special deposit schemes to bolster the Indian Rupee (INR).

Policy mix aims to stabilise INR

"In FX, USD/INR fell 0.5% to 95.71 last Friday and it declined 0.3% for the week."

"INR has remained under pressure recently due to elevated global oil prices and firm USD demand."

"However, recent restrictions on gold imports and interventions in the spot market by the Reserve Bank of India (RBI) have provided some support for INR."

"Earlier last week, local media reported that RBI Governor Sanjay Malhotra is considering hiking rates at the next meeting on 5 June to provide further support for INR."

"It is unlikely to be a standalone move. It could be supplemented by other measures such as USD bond issuance and schemes to attract dollar deposits from non-resident Indians, mirroring measures taken during the 2013 Taper Tantrum."

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