Indian Rupee holds its range against US Dollar while RBI maintains hawkish stance – Commerzbank

Resilient Indian industrial production and the Reserve Bank of India’s (RBI) hawkish stance are supporting the Indian Rupee (INR), according to Commerzbank strategists Dr. Henry Hao and Charlie Lay. USD/INR edged higher but remains comfortably within its 94–97 trading range of the past six months. The strategists caution, however, that elevated oil prices continue to weigh on the Rupee in the near term.

Rupee Finds Support but Faces Pressure from Oil Prices

"September industrial production growth moderated to 6.7% yoy (Bloomberg consensus: 7.2%) from a downwardly revised 7.8% in August. Manufacturing output growth eased to 7.6% from 8.6% previously, while electricity and gas production slowed to 11.2% from 12.3%."

"Overall, the September data suggest a moderation rather than a significant loss of industrial momentum. This is consistent with the October flash PMI which pointed to a continued expansion in manufacturing. The strength in capital and intermediate goods output points to sustained investment-related demand, although weaker consumer durables growth and subdued non-durables production suggest a less uniform recovery in household demand."

"The data remain broadly consistent with RBI’s FY2026-27 GDP growth forecast of 7.1%. The latest Bloomberg survey shows economists now expect the repo rate to reach 5.75% by end-2026 and 6.00% in Q1 2027, compared with a previous peak expectation of 5.75%. This implies a further 25bp hike by year-end and another in Q1 2027."

"USD/INR rose 0.1% to 95.23, remaining comfortably within the 94-97 range over the past six months. A hawkish RBI and resilient domestic growth remain supportive factors, but elevated oil prices are a key near-term headwind."

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