USD/INR Remains Steady As RBI Keeps Repo Rate Unchanged At 6.50%

The Indian rupee (INR) traded sideways on Friday despite a modest recovery in the US dollar (USD). Reserve Bank of India (RBI) Governor Shaktikanta Das announced the second bi-monthly monetary policy for the fiscal year 2024-25 (FY25) on Wednesday. The RBI kept the repo rate at 6.50% and the “exit easing” stance unchanged. The RBI’s Monetary Policy Committee (MPC) decided to maintain the key policy rate for the eighth consecutive time in June 2024, with the last change in the benchmark rate being in February 2023.

Meanwhile, renewed dollar demand from local importers and outflows from Indian equities are likely to weigh on the INR in the near term, despite easing political uncertainties following India’s general elections. On the other hand, potential intervention by the Reserve Bank of India (RBI) is likely to support the INR and limit the upside for the pair.

Investors will be keeping a close eye on the US employment data, including the non-farm payrolls (NFP), unemployment rate, and average hourly earnings for May. Weaker-than-expected data could fuel speculation of a rate cut by the Federal Reserve (Fed), weigh on the dollar, and weigh on USD/INR.

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