USD/INR turned red on Wednesday as the investors awaited the key FOMC decision. Although many analysts thought the FOMC decision was already priced in, the dollar strength index still tanked on Wednesday. At press time, the DXY index was down 0.35% from its previous close.
This also impacted the US Dollar to Indian Rupee exchange rate, which was trading 0.46% lower during its New York session. This marks the biggest drop for the pair since 23 August 2023. Apart from the weakness in the dollar, there are other factors at play behind the latest drop in USDINR.
USDINR Tumbles As Rupee Gains Strength
After surging above $95, crude oil prices also had a pullback on Wednesday. The decrease in oil prices also acted as a tailwind for Indian Rupee, which strengthened against the greenback. This is because oil is one of the biggest imports of India. CADINR pair also rose, which showed that the Indian Rupee also outperformed the Canadian dollar.
A strong surge in the Indian rupee on the day of the FOMC meeting led many analysts to suspect an RBI intervention. The Reserve Bank of India quite regularly manages the exchange rate by selling dollars in the non-deliverable forwards and over-the-counter markets. Such RBI interventions make analyzing USD/INR even harder.
USD/INR Forecast October
Analysts are expecting the US Fed to hike the interest rates at least once more in 2023. This may put the interest rates in the US at 5.75%. However, even after a pause in rate hikes, the rates will likely remain high for the foreseeable future.
The USD/INR forecast will remain bullish as long as the Fed keeps the rates high. While the RBI interventions may lower the impact, the high timeframe trend appears to remain in the dollar’s favor. A retest of the 85 level is also likely in the coming months if RBI lets the pair float freely.
In the meantime, I’ll keep sharing the updated USDINR forecast and my personal trades on Twitter, where you are welcome to follow me.
