Indian Rupee: OCBC Cautious on Downside Risk Against US Dollar

The Indian Rupee’s (INR) recovery has stalled. OCBC strategists Christopher Wong and Sim Moh Siong attribute the setback to renewed Oil price gains, which underscore India’s external vulnerabilities. While RBI measures and IPO inflows have supported currency stability, underlying fundamentals remain unchanged as elevated Oil prices maintain structural Dollar demand. Remaining cautious, OCBC expects Oil prices, portfolio flows and the direction of the USD to determine the INR’s next move.

Rupee recovery stalls as Oil exposes external vulnerabilities

"INR’s recent recovery stalled overnight as renewed gains in oil prices weighed on sentiment. The rebound had been supported by the RBI’s 10–12 October measures to ease USD demand pressures, alongside IPO-related inflows."

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"However, these factors have somewhat help to stabilise the currency rather than altered its underlying fundamentals. Brent’s move above USD112/bbl served as a reminder that India’s external vulnerabilities remain intact, with elevated oil prices continuing to generate structural USD demand."

"We retain a cautious stance on INR’s outlook. RBI measures should help discourage speculative positioning and limit near-term depreciation pressure, but they are unlikely to sustain further gains if oil prices remain elevated."

"In our view, the recent gains in INR have been primarily policy- and flow-driven; the next move will depend more decisively on oil prices, portfolio flows and the broader direction of the USD."

"USD/INR last closed at 94.82 levels. Bearish momentum on daily chart intact but shows tentative signs of slowing while RSI rose from oversold conditions. Some rebound risks not ruled out in the near term."

"Resistance at 95 levels, 95.20 (38.2% fibo retracement of Apr low to May high) and 95,50 (50, 100 DMAs). Support at 94.20/30 levels (61.8% fibo, recent lows). Bias to lean against strength."

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