USD/INR: Range risks and oil sensitivity – MUFG

FXStreet Insights Team FXStreet

MUFG’s Senior Currency Analyst Michael Wan expects USD/INR to remain range-bound, projecting a base-case trading band between 94.00 and 95.00 over time, with a wider 97.00–98.00 range in a risk scenario of rising Oil prices. He notes the Reserve Bank of India is likely to keep rates on hold, with INR yields staying sticky due to domestic and external risks.

RBI stance and INR range projections

"In Asia, the Reserve Bank of India kept its policy rate on hold while keeping a neutral stance in what was a unanimous vote, as it signalled a focus on keeping rupee stability over supporting growth. Governor Malhotra highlighted upside risks to inflation and downside risks to growth from the Iran conflict and global oil prices, even as he signalled overall confidence in the Indian economy and macro buffers in withstanding these external shocks. The RBI is projecting some modest slowdown in growth with GDP at 6.9% and inflation at 4.6% for FY2026/27, with an assumption of crude oil at US$85/bbl average."

"On the recent RBI FX measures, Governor Malhotra described RBI’s FX measures as temporary, reaffirmed commitment to support Rupee internationalization over the medium-term, while framed the measures as a way to weed out short-term speculation and pressure that had been building up on one-way INR depreciation bets."

"In our base-case we think USD/INR can trade between the 94.00 to 95.00 range over time. In a risk case of oil prices resuming its rise, we think USD/INR may trade closer to the 97.00 to 98.00 range. While we see RBI keeping rates on hold for now, the meaningful risk of second round effects on food prices, potential fiscal slippages and weakness in capital inflows should result in a bias for overall INR interest rate yield structure to remain sticky moving forward."

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

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD flatlines near 0.6965 as less hawkish RBA counters USD weakness

AUD/USD holds steady above a two-week low, trading near 0.6965 in the Asian session on Wednesday as early midterm election results heighten political uncertainty and weigh heavily on the US Dollar. Moreover, reviving safe-haven demand triggers a fresh leg down in US bond yields, offsetting Fed hike bets and exerting additional pressure on the buck. However, a less hawkish RBA caps the Aussie.

USD/JPY declines below 158.00 as USD weakens on midterm election results

USD/JPY comes under heavy selling pressure on Wednesday, dropping below 158.00 during the Asian session as the US Dollar slumps to a one-month low amid heightened political uncertainty after early US midterm vote counts. Moreover, the prospect of gridlock in Washington drives safe-haven flows, triggering a fresh leg down in US bond yields and further weighing on the buck.

Gold continues scaling new weekly highs; eyes $4,050 as US sticks to elections-led losses

Gold builds on its strong intraday move up, hitting a series of new weekly tops, and climbing back close to the $4,050 level during the first half of the European session amid a broadly weaker US Dollar. Democrats’ wins in the House and Senate raise the prospect of gridlock in Washington. Moreover, heightened political uncertainty drove investors to safe-haven assets, exerting some downward pressure on US bond yields. This is seen weighing on the Greenback and supporting the precious metal.

Crypto Today: Bitcoin, Ethereum, XRP extend advance as US Dollar slides on Democrats' US midterm victory

Bitcoin trades above $78,000 on Wednesday as risk-on sentiment improves in the broader cryptocurrency market. Ethereum mirrors BTC’s recovery outlook, hovering above $2,300. Ripple similarly exchanges hands above $1.28, marking two consecutive days of gains.

ADP Employment Report expected to show slower job growth in October

The Automatic Data Processing Research Institute is due to release October’s private-sector employment report on Wednesday. The market consensus anticipates a moderate slowdown in job creation, with the ADP Employment Change expected to show 69K new private jobs in October, down from 90K in September.

The 2% inflation target came from a throwaway remark. It now moves trillions

The Federal Reserve's 2% inflation goal grew out of an off-the-cuff remark by a New Zealand politician in 1988. Bond investors still price long-term US debt as if 2% holds, so a change in how the Fed measures inflation would move markets.