“ Additional, markets are pricing in additional
one hundred bps Fed price hikes, together with 50 bps next week.
Since the start of the year, the Fed has cumulatively raised rates by 375 basis factors
(bps) whereas the RBI raised it by 190 bps. The USD/INR 1-year ahead
premium has fallen to 1.70%, down almost 300 foundation factors 12 months-to-date and the lowest since 2010.
A narrower interest fee differential between the U.S.
India is primarily responsible for the fall in the USD/INR forward premiums.
Federal Reserve and the Reserve Bank of India have raised rates to manage inflation. The RBI, meanwhile, is expected to pause after increasing charges by 35 bps on Wed and 25 bps in February.
Anindya Banerjee, head of research for forex and interest charges at Kotak Securities.
Interest fee differentials have narrowed because of the divergent
pace at which the U.S. ”