USD/INR: Strong growth backdrop and stable interest rates are helping to stabilize the Rupee – Commerzbank

USD/INR is back to the lower end of the 82.70-83.50 range since the start of the year. Economists at Commerzbank analyze the pair’s outlook.

Continued strong growth momentum

The latest S&P Global preliminary PMI reports for both manufacturing and services continue to point to strong economic momentum. The manufacturing PMI for February edged up to 56.7 from 56.5 in January. The services PMI was also slightly higher at 62 from 61.8 previously. They are both well above the 50 threshold, particularly services.

Looking at the forward-looking indicators such as new orders, there were also few signs of a slowdown anytime soon.

For the Reserve Bank of India (RBI), all this is welcome news. The economy remains on a strong footing and headline inflation is expected to remain below the upper end of the 2-6% target range. The strong growth backdrop and stable interest rates are also helping to stabilize INR.