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Key Points

The rupee is expected to stabilize as global uncertainties and border tensions ease, according to UBI. It may trade between 84.63-85.74/USD with key support at 84.80. US Fed rate expectations and RBI forex reserves provide stability, but risks like DXY overshoot persist. RBI continues strategic dollar sales to manage rupee liquidity.

Key Points: Rupee to Stabilize at 84.63-85.74/USD as Global Risks Ease Says UBI

  • Rupee may trade sideways between 84.80-85.90/USD
  • US Fed rate pause aids EM currencies
  • RBI forex reserves rise to $690.6 billion
  • Border tensions and DXY overshoot remain key risks
2 min read

Rupee to consolidate between Rs 84.63-85.74/USD due to moderation of global uncertainty, border dispute: UBI

UBI predicts rupee consolidation amid easing global uncertainty and border tensions, with support at 84.80/USD and resistance near 85.90.

"Rupee volatility is expected to settle for now, supported by easing global uncertainties and reduced border tensions – Union Bank of India"

New Delhi, May 21

As the global uncertainties show signs of moderation and geopolitical tensions along India's borders settle, the Rupee will witness stability, said Union Bank of India (UBI) report.

"Rupee volatility is expected to settle for now, supported by easing global uncertainties and reduced border tensions," the report added.

The report further added that given the current global scenario, volatility is expected to temporarily subside as major uncertainties appear to have settled, at least for now.

At the time of filing thist, the rupee is trading at the level of 85.61 against the US dollar on May 21.

"We now anticipate a sideways movement in the Rupee, with support seen around Rs 84.80/USD; a decisive break below this level could open the door to Rs 84.45/USD," the report added.

On the upside, as per the report, the resistance in the exchange rate is expected near Rs 85.90 per US dollar, and a breach of that could push the pair towards 86.80 per US dollar.

"Looking ahead, we are closely monitoring two key risks: A potential overshoot in the US Dollar Index (DXY) beyond current technical levels & any fresh escalation in cross-border tensions, which could weigh negatively on Rupee sentiment," the UBI report added.

Additionally, the expectations of a pause or gradual adjustment in interest rate hikes by the US Federal Reserve are helping to reduce pressure on emerging market currencies, including the rupee.

The report added that these factors together create a more supportive environment for currency stability in the short term.

As per the data released by the Reserve Bank of India (RBI), India's foreign exchange reserves (forex) rose USD 4.553 billion to USD 690.617 billion in the week that ended on May 9. However, the previous all-time high was at USD 704.89 billion in September 2024.

Foreign exchange reserves, or FX reserves, are assets held by a nation's central bank or monetary authority, primarily in reserve currencies such as the US Dollar, with smaller portions in the Euro, Japanese Yen, and Pound Sterling.

The RBI often intervenes to manage liquidity, which includes selling dollars, to prevent steep Rupee depreciation. The RBI strategically buys dollars when the Rupee is strong and sells when it weakens.

- ANI

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Reader Comments

R
Rajesh K.
Good to see some stability in rupee after all the volatility. But we must remain cautious - any fresh tensions with China or Pakistan can change this overnight. Our forex reserves are strong but need to keep building them further.
P
Priya M.
As someone who imports materials for my small business, this stability is a huge relief! 😊 The rupee-dollar rate directly impacts my costs. Hope RBI continues its smart interventions to maintain this balance.
A
Amit S.
While the report is optimistic, I feel we're still vulnerable. US Fed decisions can change anytime and our border issues with China are far from settled. We need to reduce dollar dependence in trade with neighbors like Nepal and Bangladesh.
S
Sunita R.
The RBI deserves credit for managing our forex reserves well. But I worry when I read "all-time high was in September 2024" - is this a typo? Shouldn't it be 2021 or 2022? Makes me question the accuracy of the entire report.
V
Vikram J.
Stability in rupee is good news for common people like us. Petrol prices might not increase now! But government should focus more on making rupee stronger in long term by boosting exports and manufacturing.
N
Neha T.
Interesting analysis but I wish they explained more about how exactly border tensions affect rupee value. Is it just investor sentiment or are there actual trade impacts? Would help common people understand economics better.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

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