USD/INR drops ahead of Trump’s inauguration.

Indian Rupee Gains Ground as RBI Steps In, Eyes on Trump’s Inauguration

The Indian Rupee (INR) showed signs of recovery on Monday after experiencing its steepest weekly decline in 18 months. This rebound is supported by the Reserve Bank of India’s (RBI) frequent interventions and a drop in crude oil prices, which are likely to shield the local currency from further sharp declines.

However, challenges persist. Continuous foreign portfolio outflows and strong US Dollar (USD) demand in the non-deliverable forwards (NDF) market may weigh on the INR. Investors are closely watching the upcoming inauguration of President-elect Donald Trump at 17:00 GMT, as policy announcements, particularly regarding tariffs, could impact emerging market currencies, including the INR.

Forex Reserves and Economic Outlook

India’s forex reserves fell for the sixth consecutive week, hitting a 10-month low of $625.9 billion as of January 10, according to RBI data. Analysts note that the central bank is cautiously managing reserves to curb excessive currency volatility amidst global uncertainties. The reserves include India’s reserve tranche position in the International Monetary Fund (IMF).

Looking ahead, the World Bank projects India’s economy to grow by 6.7% in the upcoming fiscal year starting April, a slight improvement from the current fiscal year’s growth estimate of 6.5%. This marks a drop from the 8.2% growth recorded in the previous period.

US Economic Data in Focus

In the United States, Housing Starts surged by 15.8% in December, reaching 1.499 million, significantly outperforming market expectations of 1.32 million. Meanwhile, building permits dipped by 0.7% to 1.483 million, though this was still above the consensus estimate of 1.46 million.

As global markets brace for potential policy shifts under the Trump administration, the INR’s performance will remain a key focus for investors. Stay tuned for more updates on the evolving economic landscape.