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Below the Perspective on Indian Rupee by Rajani Sinha, Chief Economist, CareEdge Ratings

‘While concerns regarding Iran-Israel tensions have eased, a strong dollar continues to weigh on emerging market currencies including INR. Markets have trimmed their Fed rate cut expectations following robust economic data and higher-than expected inflation in the US. Moreover, recent commentary from Fed officials has been hawkish. FPIs have so far pulled out of Indian markets in April. Nevertheless, in the year so far, rupee remains a top performer compared to some EM and Asian peers, likely supported by RBI interventions. We expect INR to trade between 83.00 – 83.50 in the near term, though geopolitical tensions may a pose a potential risk. We expect INR to appreciate marginally during FY25 to ~82-82.50 supported by India’s strong fundamentals in terms of healthy economic growth of around 7%, a comfortable CAD of around 1% of GDP, and expected surge in FPI inflows post India’s inclusion in global bond indices.

Market attention is now focused on the release of US GDP data on Thursday and PCE inflation data on Friday. US economy is expected to show resilience. Headline inflation is expected to inch up slightly while core inflation is expected to show some moderation. Any data surprises may cause market participants to revise their US Fed rate cut bets accordingly.’

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