The current Repo rate in India is 7.25%, down from 7.50% in March 2015. The down slide in the Repo rate began in April 2012 when 8.00% was the top rate. The current Repo rate trades at 7.14. Inflation based on the June report is currently at 6.09% and up from 5.75% May 2015. The RBI is charged with maintenance of Inflation and provide reserves to the financial system. The aspect of reserves is what allows an interesting management system since Cash and money ratios is heavily monitored. The RBI likes to see fairly tight cash ratios. Its why yields and particularly interest rate spreads from top to bottom maintain barely a 1% range. Due to narrow ranges, the RBI likes to hold its exchange rates in tight spreads. The most important pairs to the RBI is USD, GBP, EUR and JPY.
EUR/INR. Bottom 69.02. Range break above 70.03, below 68.68. Overbought sell point 69.71. Long at 69.02. Current price trades between the 70.03 – 68.68 range, 69 pip range.
USD/INR. This pair is in a similar situation, tight ranges and far from significant breaks. Bottom 63.51. Range above 64.47, below 62.56. The trading range is located between the bottom at 63.51 and top at 64.15, 64 pips. Until range breaks are seen, both INR pairs will trade in small ranges.
Brian Twomey, Inside the Currency Market, btwomey.com