Commerzbank’s FX team, including Charlie Lay, Dr. Henry Hao and Moses Lim, notes that USD/INR was flat near 93.38 after intraday volatility, with the Indian Rupee (INR) still pressured by elevated commodity prices and structural deficits. The Reserve Bank of India (RBI) has tightened FX-related regulations to curb speculation and appears comfortable with USD/INR trading in a relatively stable 92–94 range in the near term.

RBI measures target speculative rupee flows

"In FX, USD/INR was flat at 93.38 yesterday. The pair fell 0.7% at the open but pared losses by midday."

"Despite some easing in oil prices in recent days, INR remains under pressure due to USD demand from importers as commodity prices remain above pre-conflict levels. The structural issues persist for INR, including elevated oil prices, a widening trade deficit, and a cautious risk backdrop for emerging markets."

"RBI has stepped in to stabilize INR in recent weeks. There were two measures, 1) it capped the net open position in rupees of dealer banks to USD100mn per day, per bank, and 2) it barred banks from offering rupee NDF contracts to resident Indians and NRIs, and simultaneously prohibited rebooking of canceled forward contracts."

"This closed the loop that had allowed speculative positions on INR to be perpetuated. We could RBI favour a stable USD/INR between 92-94 near term."

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