FX.co ★ Indian Rupee Inches Higher as RBI Holds Rates

The Indian rupee appreciated to approximately 87.77 against the US dollar following the Reserve Bank of India's decision to keep its main policy rate steady, in line with expectations, and maintain a "neutral" approach. This move came after an unexpected 50 basis points rate reduction in June. Governor Sanjay Malhotra acknowledged ongoing global trade difficulties but expressed confidence in India's economic prospects, describing them as "bright." Concurrently, U.S. President Trump announced intentions to increase tariffs on India within 24 hours, responding to India's significant purchases of Russian oil and subsequent resale on the global market for substantial profits. This tariff escalation is scheduled to take effect on August 1. Nonetheless, there are indications that India might extend an offer of “zero tariffs” to the U.S. in a prospective trade agreement, potentially alleviating tensions and bolstering the rupee's market sentiment. Domestically, the RBI revised its inflation forecast downwards to 3.1% from a previous 3.7%, maintaining it comfortably within its 2-6% target range, while GDP growth estimates remained steady at 6.5% for the fiscal year 2025/26 and 6.6% for the subsequent year.