Indian Rupee: RBI seen on hold as growth solid – Commerzbank

Commerzbank’s analysts report that USD/INR has eased as India’s June industrial production surprised to the upside and inflation stayed within the Reserve Bank of India’s target band. Despite upside risks from commodities and monsoon-related pressures, the bank expects RBI to keep the repo rate unchanged in August, with INR gains limited by ongoing Dollar demand from Oil importers.

RBI cautious with INR supported

"June industrial production surprised to the upside, rising 7.4% yoy (Bloomberg consensus: 6.0%) vs 5.0% in May, marking the strongest reading since July 2024."

"However, forward-looking indicators suggest momentum could moderate in the coming months."

"Although inflation risks remain tilted to the upside due to higher global commodity prices and a weaker monsoon season, the latest report for June CPI showed it rose 4.4% yoy, which was within RBI's 2-6% target range."

"On monetary policy, the Reserve Bank of India (RBI) is expected to leave the benchmark repurchase rate unchanged at 5.25% at its next meeting on 5 August."

"In FX, USD/INR fell 0.2% to 95.64 yesterday, tracking the softer dollar. The pair eased back from the 96.80 level in the past week. RBI’s measures to attract inflows and limits on gold imports have provided some support for INR. However, further INR gains remain capped by USD demand from oil importers amid elevated global crude prices."