Indian Rupee Weakness Persists Despite Strong PMI, Commerzbank Notes USD/INR Pressure

Commerzbank says India’s Purchasing Managers’ Index (PMI) continues to signal expansion in both manufacturing and services. However, the Indian Rupee (INR) is still under sustained pressure versus the US dollar. The bank highlights a “PMI-currency puzzle”: stronger domestic business activity has not translated into INR support. Key drivers include a higher-for-longer US interest-rate stance keeping the dollar strong, India’s trade deficit (worsened by high crude-oil import costs) sustaining dollar demand, and foreign portfolio capital outflows as global investors turn cautious on emerging markets. For traders, this divergence matters for USD/INR. A weaker Rupee can help exporters via improved price competitiveness, but it raises costs for importers and can feed inflation concerns. The Reserve Bank of India (RBI) is expected to continue measured forex market intervention mainly to limit volatility, not to force a specific exchange-rate level. Commerzbank concludes that PMI data alone is unlikely to reverse the Indian Rupee trend without a broader shift in global liquidity and risk sentiment. Traders should therefore watch US rate expectations, oil-driven import flows, and foreign portfolio flows as near-term catalysts for USD/INR momentum.