USD/INR Monthly Forecast: September 2024

According to report, the USD/INR currency pair has exhibited significant volatility, staying near the higher end of its long-term price range. Since early March, the pair has consistently set new peaks and ventured into higher-price territories. On August 5th, the USD/INR briefly surged above the 84.1000 mark, driven by exaggerated reactions in the Asian markets to USD/JPY fluctuations and a selloff in Japan's Nikkei index. However, market stability quickly returned, and the pair settled back to more familiar values within a day.

Interestingly, after the rapid August 5th spike, the USD/INR did not revert to its previous price levels. Instead, the 83.7700 area lost its support, and the 83.8600 zone began to provide new support. This change persisted until around August 16th, when the pair tested slightly lower values. A notable low of 83.6820 was recorded on August 20th before it swiftly rebounded.

Mid-August Lows and Market Reactions

The mid-August low may have led some traders to speculate that the Reserve Bank of India (RBI) might soon alter its policies to strengthen the Indian Rupee. However, this did not materialize. Despite broader forex market trends showing USD weakness, the USD/INR has maintained its elevated price range. This behavior suggests that the RBI might be tolerating higher levels in the USD/INR, possibly to test market reactions or manage inflationary pressures.

Outlook for September

The persistence of the USD/INR near the 83.9000 level indicates more than just random fluctuations. It reflects a strategic stance by the RBI, potentially hinting at a higher price range tolerance for the pair. The Indian government may be balancing the benefits of a weaker Rupee—such as boosting export demand—with the inflationary consequences it brings. As September approaches, it remains to be seen whether the USD/INR will continue to test resistance levels or if the Indian government will take action to address the currency's strength.