Goldman Sachs: Rupee to plateau as oil and US CPI loom

Goldman Sachs expects the Indian rupee to plateau against the US dollar in the near term, citing higher oil prices and upcoming U.S. inflation data. The USD/INR traded around 95.2900 on Monday, below a year-to-date high of 96.90. In a note to investors this week, the bank wrote that actions by the Indian government and the Reserve Bank of India may help limit further rupee weakness and keep the pair in a narrow range.

Geopolitical tensions in the Middle East have pushed crude futures toward $100. U.S.-Iran talks have stalled after an exchange of attacks. Iranian missile and drone operations targeted multiple locations, followed by Israeli strikes on Iranian targets. Analysts noted strikes in countries including Kuwait and Bahrain. U.S. intelligence assessments indicate Iran retains over 70% of its weapons stockpile.

West Texas Intermediate and Brent futures approached the $100 mark as the conflict intensified. Higher oil prices would raise import costs for India, which imports most of its crude, and add inflationary pressure that can affect the currency.

Markets are also watching U.S. consumer-price index data due Wednesday. Economists forecast headline CPI at about 4.2% in May, with core CPI above 3%. A stronger-than-expected print would increase the prospect of Federal Reserve rate increases later in the year; some forecasters expect at least two hikes.

Recent U.S. labour reports showed gains across several measures. Job vacancies reportedly rose by more than 700,000 in April. ADP reported private payrolls increased by about 122,000, and the Bureau of Labor Statistics recorded 172,000 new payrolls.

On technical charts, the USD/INR slipped below a 96 support level and moved under the lower boundary of an ascending channel. The pair remains above its 50-day exponential moving average, which has acted as support since October.

Goldman Sachs framed its plateau forecast as the result of potential domestic intervention and policy measures that could stabilise the rupee, balanced against external pressures from oil prices and U.S. monetary policy signals, according to the bank’s note.