FX.co ★ Rupee Edges Higher as RBI Policy Looms

The Indian rupee firmed slightly to about 95.6 per dollar, retracing part of its recent losses as investors positioned themselves ahead of the Reserve Bank of India’s upcoming policy decision. Trading remained cautious, with market participants closely monitoring guidance on interest rates and any measures to bolster foreign currency inflows.

The RBI is widely expected to leave its benchmark rate unchanged at 5.25%. Even so, currency markets are split on the chances of a surprise hike, given mounting inflation risks stemming from elevated oil prices and the rupee’s recent weakness. Attention also stayed focused on potential steps to attract more dollar inflows amid worries that higher crude prices could further widen India’s current account deficit.

Expectations are growing that the RBI will strike a more hawkish tone, with traders pricing in a 25-basis-point rate increase at the next meeting. Still, broader softness across Asian currencies and ongoing tensions in the Middle East capped the rupee’s gains.