USD/INR spot forecast after the RBI interest rate decision

The USD/INR exchange rate price held steady on Wednesday as the US dollar continued its recovery and after the latest interest rate decision by the Reserve Bank of India (RBI). It rose to a high of 82.71, which was the highest level since November 4. 

USD/INR news: RBI interest rate decision

The USD/INR price continued its recovery process this week after the latest interest rate decision by the RBI. As was widely expected, the bank decided to hike rates by 0.35% in a bid to contain the relatively elevated inflation in the country. It pushed the headline rate to 6.25% and the reverse repo rate to 3.35%.

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The RBI has not been under pressure like its global peers like the Federal Reserve and the Bank of England (BoE). For one, the Indian economy is firing on all cylinders, helped by the relatively low energy prices.

Unlike western countries, India took the crisis in Ukraine to its advantage. It did that by scooping Russian oil and gas at a significant discount. For the most part, India was buying Russian oil for less than $60 per barrel. This explains why Indian billionaires like Mukesh Ambani and Gautam Adani have added billions to their net worth this year.

India’s economy is growing because of the ongoing exit of businesses from China. Many companies, including Apple, are shifting some of their manufacturing to India. They are afraid of the rising tensions between the US and China. Further, as we wrote in this article, large Chinese cities have been on lockdown this year.

In its statement, the RBI said that the small rate increase was necessary to return inflation to the target level of 4%. It expects multiple factors like a plentiful harvest in India and low global oil prices to have a positive impact on inflation. 

The USD/INR price also rose as the US dollar made a strong comeback. The closely watched dollar index rose to $105 from last month’s low of $104. This recovery happened after the strong American jobs data.

USD/INR forecast

The four-hour chart shows that the USD/INR forex price has been in a strong bullish trend in the past few days. As it rose, the pair managed to move above the important resistance level at 81.90, the highest point on November 21.

The pair has risen above the 21-day and 50-day moving averages while the Relative Strength Index (RSI) has moved above the overbought level. Therefore, the pair will likely continue its bullish momentum as buyers target the October high of 83.28.