Indian Rupee gains on US government shutdown, RBI maintains Repo Rate at 5.5%

• The Indian Rupee gains against the US Dollar to near 88.80 after the RBI kept the Repo Rate steady at 5.5%, as expected.
• The RBI raises GDP forecasts for the current year to 6.8%.
• US government shutdown risks keep the US Dollar on the back foot.

The Indian Rupee (INR) attracts bids against the US Dollar (USD) following the Reserve Bank of India’s (RBI) monetary policy announcement. The USD/INR pair falls to near 88.80 as the RBI has kept the Repo Rate steady at 5.5%, as expected, citing that the impact of the front-loaded monetary policy actions and the recent fiscal measures are still playing out.

Financial market participants had already anticipated that the RBI would maintain the status quo, as it would need to perform a delicate balancing act between Goods and Services Tax (GST) cuts and dampening the export market.

India’s export sector has been hit badly since the increase in tariffs to 50% on imports from New Delhi to the United States (US). President Donald Trump raised the import duty on Indian products as a penalty for buying Oil from Russia.

Meanwhile, RBI Governor Sanjay Malhotra has also warned that higher US tariffs would slow down the Indian export market. “Higher tariffs are likely to moderate export growth,” Malhotra said in the monetary policy statement.

With the GST cuts announcement in effect, the RBI has raised the Gross Domestic Product (GDP) forecast for the current financial year to 6.8% from 6.5% projected earlier. The RBI has stated that it will continue to maintain a “neutral” stance on interest rates and has revised the headline inflation forecast for FY2026 downwards from 3.1% to 2.6%.

US ADP Employment data to influence expectations for Fed’s policy outlook

• The US Dollar trades cautiously against its peers on the US government shutdown, as Democrats have not supported the short-term funding bill, which was expected to extend the shutdown deadline to November 21.
• At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, posts a fresh weekly low near 97.45.
• On Tuesday, US President Donald Trump said, while addressing reporters at the White House, “We’ll probably have a shutdown.” He also warned that Democrats would bear the consequences, as he has the power to cut benefits favourable for them during the shutdown. However, Trump didn’t specify any action he is considering now. “They’re taking a risk by having a shutdown. We can do things during the shutdown that are irreversible, that are bad for them,” Trump said, Time Magazine reported.
• The partial shutdown of the US government could halt key economic releases, including the official employment data for September, which has been a key trigger to speculation for the Federal Reserve’s (Fed) monetary policy outlook.
• With uncertainty over whether the US Labour and Commerce departments will release key labor market data this week, the significance of the ADP Employment Change data for September, publishing at 12:15 GMT, has increased. Economists expect the US private sector to have added a fresh 50K workers, marginally lower than 54K in August.
• Signs of a slowdown in the job market would boost market expectations for more interest rate cuts by the Fed. On the contrary, upbeat labor data would weaken the same. According to the CME FedWatch tool, there is a 94.6% chance that the Fed will cut interest rates again in the policy meeting later this month.

Technical Analysis: USD/INR stays above 20-day EMA

USD/INR falls to near 88.80 on Wednesday. However, the near-term trend of the pair remains bullish as the 20-day Exponential Moving Average (EMA) slopes higher around 88.50.

The 14-day Relative Strength Index (RSI) stays above 60.00, suggesting a strong bullish momentum.

Looking down, the 20-day EMA will act as key support for the major. On the upside, the round figure of 90.00 would be the key hurdle for the pair.