RBI said to be likely stepping into the market to try and limit the rupee's fall

What the desk is arguing

The desk posits that the RBI's intervention is a necessary but insufficient measure to halt the rupee's depreciation against the dollar. As noted in the source, the USD/INR has recently traded around 94.950, highlighting the ongoing pressure from higher oil prices and geopolitical uncertainties. The RBI's actions are a response to the rupee's decline, which has been exacerbated by the closure of the Strait of Hormuz and the implications for India's crude oil imports.

Supporting this view, the rupee has shown a consistent downward trajectory since early April, following a brief recovery. The desk emphasizes that the RBI's intervention is crucial, yet the market remains skeptical, as the USD/INR continues to find support at elevated levels despite these efforts. This suggests that traders are pricing in further challenges for the rupee as oil prices remain a significant concern.

Where it sits in our coverage

Our consensus target for USD/INR is 1.075, with a range of 1.04 to 1.12. Key firms contributing to this consensus include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26) - goldmansachs: 1.12 (Mar26)

This view aligns with jpmorgan, which sees potential upside for the rupee but acknowledges the risks posed by external factors. The desk's outlook is positioned towards the upper bound of the consensus range, reflecting a more cautious stance on the rupee's recovery prospects.

How other firms see it

Firms aligned with the desk's view include jpmorgan and goldmansachs, both of which anticipate further volatility in the USD/INR pair due to external pressures. Conversely, bofa holds a more bearish outlook, suggesting a stronger dollar could push the rupee lower.

Market participants should also keep an eye on related currency pairs such as EUR/INR and the broader implications of global oil prices on emerging market currencies. The trajectory of USD/JPY may also provide insights into how the dollar's strength could impact the rupee's performance.