MUMBAI — The Indian rupee strengthened against the U.S. dollar on Thursday after the Reserve Bank of India kept its benchmark policy rate unchanged and reaffirmed confidence that inflation remains under control, while investors also drew support from easing oil prices and sustained foreign capital inflows.
The rupee traded firmer in the aftermath of the central bank's monetary policy announcement, extending a recent recovery from record lows seen earlier this year. Market participants said the currency was supported by the RBI's decision to leave the repo rate at 5.25% while lowering its inflation forecast and maintaining a neutral policy stance, signaling that policymakers do not see an immediate need for tighter monetary policy.
RBI Governor Sanjay Malhotra said inflation was expected to remain manageable despite higher global energy prices, although he cautioned that policymakers would continue monitoring potential second-round effects from commodity costs. The central bank also marginally raised its economic growth forecast for the current fiscal year while trimming its inflation outlook.
Currency traders said the policy decision reduced uncertainty over India's monetary outlook and reinforced expectations that interest rates could remain unchanged for several more months. Analysts have pushed back forecasts for the next rate increase, with many now expecting any tightening cycle to begin no earlier than late 2026 or early 2027.
The rupee also benefited from lower international crude oil prices, a key factor for India because the country imports most of its energy needs. Softer oil prices are expected to ease pressure on the country's trade balance and inflation, reducing demand for dollars by domestic importers.
In addition, investors pointed to continued foreign inflows into Indian financial markets, aided by measures introduced by the RBI in recent months to strengthen the country's balance of payments and support foreign currency funding. Those inflows have improved sentiment toward the rupee and increased its appeal in carry-trade strategies, according to market analysts.
Asian currencies were broadly steady against the dollar, while the U.S. currency index remained below the 100 level as investors assessed global monetary policy expectations and geopolitical developments affecting energy markets.
The RBI reiterated that future policy decisions would remain data-dependent, with inflation, growth and global developments continuing to guide the central bank's assessment of the appropriate monetary policy path.
