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The Indian rupee managed to maintain its stability on Wednesday, thanks to intervention by the Reserve Bank of India (RBI) in both the non-deliverable forward (NDF) and over-the-counter (OTC) markets. Despite these efforts, analysts are revising their forecasts for the USD/INR exchange rate as external factors continue to apply pressure.

By 10:30 a.m. IST, the rupee stood at 83.24 against the U.S. dollar, a slight improvement from the previous session’s closing rate of 83.2675. The RBI’s intervention involved selling dollars through public sector banks, aiming to prevent the rupee from breaching the record low of 83.29.

Notably, the RBI took action in both the OTC and NDF markets before the typical opening time of onshore currency markets at 9:00 a.m. IST.

Despite the RBI’s efforts to support the rupee, analysts have adjusted their USD/INR forecasts upwards, with DBS bank analysts now targeting 84 by the end of 2023, up from their previous forecast of 81.8. They anticipate the rupee settling in the 83-85 range, which is weaker than the 81-83 range seen earlier in the year.

Several factors are contributing to this outlook, including the depreciation of the Chinese yuan, a narrow rate differential between the U.S. and India, and rising crude oil prices.

While the rupee avoided reaching a record low on this occasion, experts warn that downside risks persist. Dilip Parmar, a foreign exchange research analyst at HDFC Securities, highlights that uncertainties continue to loom over the currency’s future.

In the broader financial landscape, Brent crude futures experienced a nearly 1% drop, reaching $93.48, following a recent year-to-date high of $95.96. Additionally, most Asian currencies weakened as investors anxiously awaited the U.S. Federal Reserve’s policy decision.

The Federal Reserve is expected to maintain its current interest rates, but market participants are closely monitoring the central bank’s interest rate and growth projections for potential market implications. As such, the Indian rupee faces a complex interplay of domestic and global factors as it navigates its path in the coming months.