The USD/INR pair remained range-bound on Wednesday, with traders avoiding big bets ahead of the US GDP report, which could provide fresh signals on the Federal Reserve’s next policy move. With uncertainty over US economic growth and inflation trends, investors are staying cautious, keeping the currency pair within a narrow trading band.
The US dollar has struggled to find clear direction as markets weigh the Fed’s interest rate path. While recent data has reinforced expectations that the central bank will remain cautious about rate cuts, signs of slowing growth in the US economy could lead to a shift in policy expectations. A weaker-than-expected GDP reading could pressure the greenback, giving emerging market currencies like the Indian rupee some breathing room.
Meanwhile, the Indian rupee has remained relatively stable, supported by Reserve Bank of India (RBI) interventions and resilient domestic economic fundamentals. The central bank has been active in managing excess volatility in the forex market, ensuring that the rupee does not experience sharp fluctuations. However, external factors, including global risk sentiment and capital flows, continue to influence the pair’s near-term outlook.
Foreign fund flows have also played a role in keeping USD/INR in check, with foreign institutional investors (FIIs) showing a mixed approach to Indian markets. While India’s robust economic growth has attracted long-term investments, short-term outflows amid global risk concerns have kept the rupee from gaining significant ground.
Oil prices remain a key factor for the rupee, as India is a major crude importer. Any sustained increase in energy costs could widen India’s trade deficit, increasing dollar demand and putting pressure on USD/INR. With crude prices hovering around recent highs, traders remain watchful for any new developments that could impact currency movements.
For now, USD/INR remains in a holding pattern, with traders waiting for US GDP data to set the next direction. A stronger reading could support the US dollar, keeping the pair elevated, while a weaker figure may lead to renewed rupee strength. Until then, the pair is likely to stay within its recent range, reacting to broader market sentiment and global economic cues.
