OCBC highlights that USD/INR has pulled back from record highs as reports suggest the RBI is exploring tools to steady the Rupee, including possible rate hikes and FX operations. The bank views the move as a circuit breaker rather than a trend change, with higher Oil, elevated UST yields and portfolio outflow risks still weighing on INR near term.

Rupee needs friendlier external backdrop

"INR recovered from record lows after reports that the RBI may be looking at options to steady the currency, including a possible rate hike, FX swaps and other dollar-liquidity measures. Reported dollar-selling by state-run banks also helped pull USD/INR back to low of 96 levels from near the 97-handle."

"The snapback is a useful “circuit breaker”after the recent slide, but further INR recovery still requires the external backdrop to improve. Higher oil prices, elevated UST yields and portfolio outflow risks remain INR headwinds. In the interim, the RBI’s signal is useful in slowing one-way depreciation but is unlikely to fully change the direction on its own."

"Bullish momentum on daily chart shows tentative signs of fading while RSI fell from overbought conditions. Slight risk to the downside. Support at 95.20 (21 DMA), 93.90 (50 DMA). Resistance at 97 levels."

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