Indian Rupee: Range-Bound vs Dollar Supported by RBI – Commerzbank

Commerzbank FX analysts note that with the Reserve Bank of India keeping its policy repo rate unchanged at 5.25% and maintaining a wait-and-see stance, the USD/INR exchange rate is expected to remain broadly stable. USD/INR is currently trading near 95.75849, with the market closely monitoring the central bank's subsequent policy signals.

**Central Bank Strategy Shifts to Diversified Tools**

The Reserve Bank of India has recently adjusted its exchange rate management strategy, shifting from past reliance on dollar-selling intervention to a more sustainable, diversified approach. According to reports, the central bank is attracting foreign inflows by enhancing the appeal of foreign currency non-resident deposits and easing rules for foreign investors purchasing Indian government bonds, thereby supporting the rupee without drawing down foreign exchange reserves. Direct dollar selling remains an option but has been relegated to a last resort.

**External Risks Still Warrant Caution**

Despite strong support from the RBI, the rupee remains vulnerable to external shocks. Commerzbank has previously warned that Middle East tensions could pressure the Indian economy—highly dependent on imported crude oil—by pushing up energy costs, leaving the rupee susceptible to oil price fluctuations. However, analysts believe the RBI's ample foreign exchange reserves and proactive capital-attraction measures provide a buffer against such shocks.

**Range-Bound Pattern Unlikely to Break in Near Term**

Market data shows USD/INR has traded persistently within a range of 82.50 to 83.50 over the past several months. Commerzbank economists believe that with the RBI unlikely to cut rates ahead of the Federal Reserve, this range-bound pattern may be difficult to break in the near term. The central bank's stabilizing stance will continue to provide floor support for the rupee while limiting scope for significant appreciation.