India’s rupee rate has seen a steady pace these last few days, changing little in its value. However, it seems like there could be an opening for a rally to take place for the Indian currency. We can have a quick look at the variables to see if this is possible in this article. The US dollar has weakened, and oil prices have risen, which has aided many Asian currencies.
If we look at the current rates, we see that the dollar vs rupee rate is around $83.19. This is little changed from the previous session.
Brent crude oil has managed to reach a high point in its value this Tuesday, going up to $81.72. This is an 11% rise from its lowest point this December. The main reason for this may be the recent Red Sea attacks by the Houthis. The recent clash has sent shockwaves in markets worldwide, increasing worries about trade disruption.
However, if things remain stable, the USD to INR rate could easily reach 83.20 in the short term.
The measures that the Reserve Bank of India have taken a toll on the currency as it tried to combat volatility. A heavy intervention by the central bank spoils the possibility of a high rise in the rupee rate, but it allows it to be more stable. Currently, the Rupee’s volatility is at its lowest point in years.
As the US Fed seems likely to cut rates going into 2024, speculation on other major currencies has driven up. This is especially true in Asia. While the Fed has only announced 3 rate cuts so far, many analysts have priced in 6 rate cuts in their forecasts. Part of the reason for this may be that the Fed was surprised by the market reaction to its latest statement. People seemed much more ready for rate cuts than the Fed believed, so more cuts may be necessary not to disappoint markets. We will have to take this into account for any future Indian rupee rate forecasts.
