The Reserve Bank of India (RBI) has cut the repo rate by 25 basis points, as anticipated, signalling the possibility of further easing given record low inflation levels. During the press conference, RBI Governor Malhotra indicated a move towards reducing the central bank’s market intervention aimed at preventing further depreciation of the Indian rupee.

Historical trends suggest that central bank intervention is often ineffective if underlying economic fundamentals do not support the currency. Currently, these fundamentals continue to favour rupee depreciation, especially in light of the RBI’s rate cuts and limited progress in US-India trade negotiations.

Looking at the USD/INR chart, the pair recently tested support around 89.70 and bounced back following the RBI’s announcement. There is now a minor resistance zone near the 90.00 level.

For forex traders, a break above this resistance could push the USD/INR to a new all-time high, representing significant weakness for the rupee. Conversely, if the 89.70 support fails, the pair may retrace further, targeting the 89.00 level.

Original Source: Giuseppe Dellamotta of investinglive.com