Indian Rupee to Trade in Rs 83.25-83.75 Range Against USD in Q1FY25
The Indian rupee is expected to remain within a narrow trading range of Rs 83.25–83.75 against the US dollar for the rest of the first quarter of the fiscal year 2025 (Q1FY25), according to Rajani Sinha, Chief Economist at CARE Ratings. This range is primarily attributed to anticipated interventions from the Reserve Bank of India (RBI) aimed at curbing volatility in the currency market.
Sinha highlighted that inflation in the United States has exceeded market expectations for four consecutive months, intensifying inflationary concerns. The US Federal Reserve’s May policy statement acknowledged limited progress towards its inflation goal and emphasized ongoing uncertainty in the inflation trajectory. Market expectations indicate that US interest rates will remain elevated for an extended period, with projections pointing to just one rate cut in 2024.
In terms of foreign portfolio investments (FPIs), there was an outflow from Indian markets in April; however, FPI inflows are anticipated to rebound once India is included in the JP Morgan bond index in June. This inclusion is likely to boost investor confidence and attract additional capital inflow into Indian markets.
Attention now turns to the upcoming US job market report, which experts believe will show a strong labor market. Although non-farm payroll additions may slow in April, they are expected to remain substantially higher than pre-Covid levels. The US unemployment rate is predicted to hold steady.
Jateen Trivedi, Vice President Research Analyst at LKP Securities, emphasized the importance of the forthcoming US non-farm payroll data and unemployment figures. These releases are seen as crucial indicators for the Federal Reserve's monetary policy decisions and could influence market movements.
On Friday, the rupee showed minor strength at opening, trading within a range of 83.33-83.45 before closing around 83.42, according to Trivedi. Overall, the rupee's trajectory is expected to stay within the narrow band in the short term, with market participants closely monitoring the US job market data and its implications for Fed policy.
