USD/INR: Oil-linked pressure and RBI oversight – Commerzbank

Commerzbank analysts highlight that USD/INR rose 0.4% to 94.55, nearing its late-March all-time high, after the Reserve Bank of India (RBI) eased some curbs on Non-Deliverable Forward (NDF) offerings. The bank notes Indian Rupee (INR) could stay under pressure while Oil prices remain elevated, though RBI plans tighter NDF reporting from July 2027 and may step up measures to limit currency weakness.

Rupee nears record as NDF rules shift

"March industrial production rose more than expected by 4.1% yoy (Bloomberg consensus: 2.7%) vs 5.1% in February. Growth was broad-based but it was the lowest in five months due to supply chain disruptions related to the conflict in the Middle East. It could continue to face headwinds in the coming months."

"On the other hand, investment activity appears to remain firm with capital goods jumping 14.6% vs 12.4%. Consumer demand also remained supportive with consumer durables growing 5.3% vs 7.1% in February, while non-durables grew 1.1% vs -0.5% previously and was the first positive reading this year."

"In FX, USD/INR rose 0.4% to 94.55 yesterday, approaching its all-time high of 95.13 in late March. The pair has risen steadily since 20 April, following the Reserve Bank of India's (RBI) decision to ease some of the curbs on NDF offerings by authorised dealers."

"However, RBI has tightened its oversight of NDF trades. Beginning in July 2027, domestic banks are directed to report all transactions involving both deliverable and non-deliverable contracts to the central bank. INR may remain under pressure as long as oil prices are elevated, but we could also see RBI step up measures to mitigate the weakness."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)