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RBI leaves the Repo Rate unchanged at 5.25% in August, as expected

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) announced on Wednesday that it held the benchmark Repo Rate steady at 5.25% following the conclusion of the August monetary policy meeting.

The decision came in line with the market expectations.

Speeches from RBI Governor Sanjay Malhotra

West asia conflict continues to challenge global economy.Crude oil prices, currencies, financial markets remain volatile.

Global economic environment has become increasingly unstable.

MPC retains policy stance at ‘neutral.’

Headline inflation has edged up above target.

Higher inflation mostly on account on fuel, food with little signs of generalisation of price pressures so far.

Domestic economic activity has exhibited resilience.

There is need for greater clarity on inflation before taking policy action.

Supply side pressures from west asia conflict have eased somewhat.

Inflation not getting broad based, expected to decline after peaking in Q3FY27.

MPC underscored it will maintain close vigil, stay resolute on aligning inflation to target.

Investment activity remains steady.

Indian economy performed better than expected in Q1FY27.

Q3 FY27 CPI inflation seen at 5.9% (previously at 5.9%).

Q4 FY27 real GDP growth seen at 6.8%.

Q4 FY27 CPI inflation seen at 5.5%.

USD/INR reaction to the RBI interest rate decision

The Indian Rupee (INR) catches fresh offers and extends lower in an immediate reaction to the RBI interest rate decision. The USD/INR pair currently trades at 95.05, down 0.04% on the day. 

This section below was published on August 5 at 00:30 GMT as a preview of the Reserve Bank of India (RBI) interest rate decision.

  • The RBI is set to leave policy rates unchanged on Wednesday.
  • The Reserve Bank of India might retain the data-dependent approach for the monetary policy outlook.
  • Investors will closely track comments on FCNR deposits, inflation and the economic outlook.

The Reserve Bank of India (RBI) is set to announce its bi-monthly monetary policy decision on Wednesday at 10:00 AM IST (04:30 GMT), another meeting coming at a time when uncertainty remains high over the duration and economic fallout of the ongoing Middle East conflict.

RBI seen on hold as inflation remains within target band

Analysts at Commerzbank expect the Reserve Bank of India to maintain its current policy stance, noting that the RBI is “expected to leave the benchmark repurchase rate unchanged at 5.25% at its next meeting on 5 August.” While they acknowledge that “inflation risks remain tilted to the upside due to higher global commodity prices and a weaker monsoon season,” Commerzbank highlights that the June Consumer Price Index (CPI) print “rose 4.4% yoy, which was within RBI’s 2-6% target range,” reinforcing the case for policy continuity in the near term.

The RBI is also expected to leave the Standing Deposit Facility (SDF) and the Marginal Standing Facility (MSF) rates unchanged at 5% and 5.5%, respectively.

According to the latest Reuters poll, 68 of the 72 economists expect the RBI to leave its policy rates at their current levels.

So far this year, the RBI has maintained the status quo at all three policy meetings and has kept rates unchanged since cutting the Repo Rate by 25 basis points (bps) to 5.25% in the December 2025 meeting.

What happened in the last meeting?

In the June policy meeting, the Indian central bank raised its inflation forecast, after leaving policy rates steady, for FY26-27 to 5.1% Year-on-Year (YoY) from 4.6% projected earlier, citing that higher input prices such as base metals, plastic and rubber, and rising commercial Liquefied Petroleum Gas (LPG) prices are putting upward pressure on overall prices.

The RBI also lowered its real Gross Domestic Product (GDP) growth forecast for the current year to 6.6% from its prior expectations of 6.9%.

On the monetary policy outlook, RBI Governor Sanjay Malhotra said that it is “prudent to wait for greater clarity to emerge” and the central bank will remain “data-dependent”.

Key things to watch

Investors will pay close attention to commentary from RBI Governor Malhotra regarding inflation and the economic outlook on the back of the ongoing geopolitical crisis.

In the last meeting, RBI Governor Malhotra acknowledged heightened global uncertainty amid geopolitical risks, and said that the extended disruption in global supply chains and higher energy prices have prompted risks both to inflation and growth. However, he assured that the economy is able to “withstand these shocks with minimum pain”.

In an interview with Businessline, released last week, RBI Governor Malhotra made clear that price stability is their key priority, but policymakers don’t see any signs of price pressures entrenching. “Our primary mandate is inflation and price stability. Therefore, we will do whatever is required first, to keep price stability and then, to see to what extent we can support growth,” Malhotra said.

Investors will also focus on commentary about India’s interest rate outlook. Analysts at Axis Bank say, “The MPC is ​likely to shift language acknowledging risks of firmer inflation and policy action ahead, while maintaining a data-dependent approach.”

Financial markets would also be keen to know the performance of Foreign Currency Non-resident (FCNR) deposits, which were announced in the June meeting, aiming to increase the inflow of foreign funds to support forex reserves. The tool allows commercial banks to raise funds via foreign currency deposits whose ‌full hedging cost is borne by the RBI.

India flows recover as DBS flags stronger debt, equity and FCNR(B) momentum

Analysts at DBS Group Research highlight that “the flows picture is, meanwhile, on the mend,” pointing to a “resumption in portfolio inflows into equity and debt markets as well as positive cues on the swap schemes.” They note that “July saw debt markets attract more than $2bn in inflows, bringing FYTD debt inflows to $7.7bn, while equities recorded $1.5bn worth flows following consecutive months of outflows.”

In addition, DBS cites comments from RBI Governor Malhotra, who said in an interview that “banks had mobilized a cumulative $32bn via the swap windows to-date, already surpassing the scale of inflows raised back in 2013.” Against this backdrop, DBS reiterates that “we expect the scale of the FCNR(B) deposits, in particular, to pick up in second half of the scheme’s validity period, as KYC/compliance requirements are completed,” and cautions that “at the current run-rate, our conservative estimate of $45-50bn of total inflows under the special schemes could be overshot.”

USD/INR technical outlook points to a mild bearish bias

USD/INR retains a mildly bearish near-term bias as it holds below the 20-day Exponential Moving Average (EMA) at 95.72. The short-term trend structure suggests the pair is capped by this dynamic resistance, while the 14-day Relative Strength Index (RSI) at 45 keeps momentum in a neutral-to-bearish zone, hinting at a lack of strong buying conviction after the recent pullback from the 96.00 area.

On the topside, immediate resistance is defined by the 20-day EMA at 95.73, and a daily close above this barrier would be needed to extend the recovery towards 96.00. On the downside, major sup

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USD/JPY Price – 200-day SMA caps rebound after intervention-led selloff

  • USD/JPY edges higher as the Japanese Yen gives back part of its intervention-led gains.
  • The pair has slipped below all major moving averages, turning the near-term bias bearish.
  • RSI signals oversold conditions, while the 200-day SMA at 158 offers immediate resistance.

USD/JPY trades modestly higher on Tuesday despite a softer US Dollar (USD), as the impact of recent intervention fades and the Japanese Yen (JPY) comes under pressure again. At the time of writing, the pair trades around 157.60, recovering after briefly falling toward 155 on Monday, its lowest level since May 6.

Analysts at Societe Generale argue that a lasting recovery in the Yen will hinge on the domestic growth story rather than policy theatrics, maintaining that “what will trigger a durable yen rally will be a rise in consensus forecasts of Japanese growth, rather than more, bigger intervention, coordinated or otherwise.”

They add that “more, or faster BoJ rate hikes won’t solve the problem either, unless the Japanese growth outlook makes them appear realistic,” cautioning that “if Japanese growth remains weak, higher JGB yields will increasingly be unhelpful for the yen.”

In contrast, strategists at BBH focus on the near-term impact of recent official action, noting that “the coordinated US-Japan intervention – and officials’ warning that they stand ready to act again – significantly raises the cost of fighting a stronger yen and puts a much firmer ceiling on USD/JPY.”

From a technical perspective, the intervention-driven pullback in USD/JPY has weakened the near-term bullish structure, with the pair slipping below key moving averages.

On the daily chart, the 200-day Simple Moving Average (SMA) at 158 offers immediate resistance. Further up, the 100-day SMA at 160 guards the path toward the 50-day SMA at 161.26 and the 21-day SMA at 161.89, ahead of a more distant structural hurdle at 164.

The Relative Strength Index (RSI) at 27 signals oversold conditions, while the Moving Average Convergence Divergence (MACD) remains below zero, reflecting the recent shift in momentum to the downside.

On the downside, the 155.00 psychological mark offers immediate support. A decisive break below this level could expose the 152.50 area, with the 150.00 psychological mark emerging as the next major downside target.

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EUR/JPY Price Softens below 182.00 on intervention risks, bearish outlook prevails

  • EUR/JPY declines to near 181.70 in Wednesday’s early European session.
  • The cross keeps a negative tone, with bearish RSI momentum.
  • The first upside barrier emerges at 184.90, the initial support level to watch is 181.15.

The EUR/JPY cross trades in negative territory around 181.70 during the early European trading hours on Wednesday. The Japanese Yen (JPY) strengthens against the Euro (EUR) as traders remain on alerts for further intervention from Japanese authorities following the coordinated intervention between the United States (US) and Japan.

Traders will closely monitor the developments surrounding US-Iran talks. Axios reported that the US, Iran, and Oman are closing in on an interim deal to reopen the Strait of Hormuz, with Washington aiming for a Wednesday announcement.

The source added that the agreement under discussion sets up a 60-day temporary arrangement between Oman and Iran in the critical waterway. Fresh optimism over the Middle East could improve risk sentiment and provide some support to the riskier asset, such as the EUR against the JPY.

Yen outlook seen hinging on growth rather than faster BoJ hikes

Societe Generale argues that the policy rate path alone is unlikely to deliver a sustained recovery in the Yen. Analysts there stress that “more, or faster BoJ rate hikes won’t solve the problem either, unless the Japanese growth outlook makes them appear realistic,” underscoring their view that a credible improvement in Japan’s growth prospects is a prerequisite for any meaningful policy tightening to support the currency.

Chart Analysis EUR/JPY

Technical Analysis: Negative outlook of EUR/JPY remains intact

In the daily chart, EUR/JPY keeps a bearish near-term tone as spot holds below the 20-day simple moving average (SMA) from the Bollinger Bands and the 100-day SMA, which now act as a tight resistance cluster overhead. Price is sliding toward the lower Bollinger Band while the Relative Strength Index (14) at 34.77 stays close to oversold territory, hinting that downside pressure persists but may be approaching a fatigue zone.

On the topside, initial resistance is aligned at the Bollinger mid-line/20-day SMA near 184.90, followed by the 100-day SMA at 185.10. A decisive daily close above this level would be needed to ease the current downside bias, with the upper Bollinger Band up at 188.65 as a more distant barrier. 

On the downside, the lower Bollinger Band around 181.15 offers the first notable support, and a clear break beneath it would expose the February 12 low of 180.81, en route to the 180.00 psychological level. 

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Canadian Dollar hangs near one-week low as weak oil prices counter USD downtick

  • USD/CAD attracts buyers for the fourth straight day, though it lacks follow-through amid mixed cues.
  • Sliding oil prices undermine the Loonie, while receding geopolitical risks weigh on the safe-haven USD.
  • Prospects for at least one Fed rate hike in 2026 favor USD bulls as traders look to the US macro data.

The USD/CAD pair trades with a positive bias for the fourth straight day and currently hovers around the 1.4070 region, or a nearly one-week high set the previous day. Spot prices, however, lack bullish conviction amid a combination of diverging forces, which warrants caution before positioning for an extension of the recent bounce from sub-1.4000 levels or the lowest since June 17.

Renewed hopes of a potential US-Iran deal to reopen the Strait of Hormuz drag crude oil prices to a nearly four-week low and undermine the commodity-linked Loonie, which, in turn, is seen supporting the USD/CAD pair. Meanwhile, weaker oil prices ease inflation fears and temper US Federal Reserve (Fed) rate hike expectations. Adding to this, receding geopolitical tensions weigh on the safe-haven US Dollar (USD) and cap the upside for the currency pair.

In the latest developments surrounding the Middle East crisis, Axios reported that the US, Iran, and Oman are closing in on an agreement to reopen the Strait of Hormuz. This comes on top of US Treasury Secretary Scott Bessent’s comments that the US could reach a deal with Iran to reopen the strategic waterway by Wednesday and move toward a more normalized position in this conflict. The remarks fueled optimism over a diplomatic resolution to end the US-Iran war.

Traders, however, are still pricing in a greater chance that the US central bank will raise borrowing costs by the end of this year amid signs that the US labor market is beginning to find its footing and looming inflation risks. Adding to this, Kansas City Fed President Jeff Schmid and Philadelphia Fed President Anna Paulson backed the case for higher interest rates to fight inflation. This should limit deeper USD losses and support prospects for further USD/CAD appreciation.

Traders now look to Wednesday’s US economic docket – featuring the release of the ADP report on private-sector employment and ISM Services PMI. Apart from this, the incoming geopolitical headlines and speeches from influential FOMC members would drive the USD demand. This, along with oil price dynamics, should provide some impetus to the USD/CAD pair. The focus, however, remains glued to the crucial monthly jobs report from the US and Canada, due on Friday.

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Swiss Franc gains as easing risk aversion weighs on US Dollar

  • Easing tensions in the Strait of Hormuz reduced safe-haven demand for the US Dollar, causing the pair to depreciate.
  • The US, Iran, and Oman are expected to close an interim deal to reopen the Strait of Hormuz, targeting a Wednesday announcement.
  • BBH’s Elias Haddad says low Swiss inflation and a steady SNB keep weighing on the Franc, G10’s weakest currency this quarter.

USD/CHF extends its losses for the second successive day, trading around 0.8080 during the Asian hours on Wednesday. The pair depreciates as the US Dollar (USD) loses ground as safe-haven demand recedes amid growing diplomatic momentum surrounding a potential agreement to reopen the Strait of Hormuz.

Axios reported that the United States (US), Iran, and Oman are closing in on an interim agreement to reopen the Strait of Hormuz, with the US aiming for a Wednesday announcement. The report also stated that the deal under discussion sets up a 60-day temporary arrangement between Oman and Iran in the Hormuz Strait, a critical chokepoint to almost 20% of global energy supply, which could be extended.

However, the US Dollar could find minor support from a recovery in the benchmark 10-year US Treasury yield after it dipped toward 4.61% on Tuesday. That initial decline in yields was driven by falling energy prices, which helped cool inflation fears and tempered expectations of a hawkish response from the Federal Reserve (Fed).

Schmid flags AI-driven inflation risks, backing tighter Fed stance despite resilient growth

Fed’s Schmid delivered a modestly more hawkish message than relative to the historical average, with a 7.3/10 FXS Speechtracker score versus a 7/10 baseline, stressing that the current policy stance is “not tight” and that tighter monetary policy is required to return inflation to the 2% target. The emphasis on AI-related investment as a fresh inflation driver, the warning that recent disinflation is too tentative to confirm an easing trend, and the view that inflation remains “too high” and “worrisome” all reinforce a bias toward further restraint even as growth and the labor market are described as resilient and roughly balanced. By highlighting the PCE gauge as the preferred inflation metric and cautioning that energy relief may be temporary, the speech leans clearly toward guarding against upside price risks rather than validating imminent rate cuts.

The FXS Fed Sentiment Index slipped by 0.96 points to 145.80, signaling a slight pullback in perceived hawkishness following the speech. However, with the FXS Fed Sentiment Index still far above the neutral 100 line, the Fed remains firmly in hawkish territory despite the marginal softening, consistent with the elevated FXS Speechtracker reading and Schmid’s focus on persistent inflation risks.

Analysts at Brown Brothers Harriman note that Swiss price pressures remain very subdued, with July inflation coming in “in line with consensus.” They highlight that “headline CPI printed at 0.4% y/y vs. 0.5% in June while core CPI remained at 0.3% y/y for a fourth straight month,” reinforcing the Swiss National Bank’s assessment of only modest inflation over the forecast horizon and helping to keep the policy rate anchored at 0.00%. In this context, Elias Haddad at BBH argues that the persistently low inflation backdrop and steady SNB stance continue to weigh on the Swiss Franc, which has been the weakest G10 currency so far this quarter.

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Offshore Yuan Holds Firm at 2023 Peak

The offshore yuan held its gain around 6.74 per dollar on Wednesday, staying at its strongest level since early February 2023 as improving prospects for a renewed Middle East agreement boosted risk sentiment. Qatar said mediation efforts between the US and Iran had entered an advanced phase, with a draft agreement already prepared. US officials signaled growing confidence that a deal could be reached soon, raising hopes for the reopening of the Strait of Hormuz. On the domestic front, a private survey showed China’s Composite PMI fell to a one-year low of 50.8 in July 2026, reflecting slower momentum across the economy. The manufacturing PMI eased to a four-month low of 50.9, while the services PMI slipped to its weakest level in nearly two years at 50.4. Meanwhile, the People’s Bank of China announced a CNY 500 billion three-month outright reverse repo operation to maintain ample liquidity in the banking system, with bids determined through multi-tier interest-rate pricing.

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South Korea 10-Year Yield Hits 4-Week Low

South Korea’s 10-year government bond yield fell to around 4.15% in early August, hitting a four-week low as it tracked a decline in global bond yields. Qatar reported progress in mediation efforts to end the US-Iran conflict, although details remained limited, helping push oil prices lower and reduced inflation concerns. Nevertheless, the latest minutes from the Bank of Korea’s July meeting showed policymakers would carefully assess the timing and pace of further tightening, with some members favoring preemptive action to contain inflation risks. The seven-member board unanimously raised the policy rate by 25 bps last month, marking its first hike in three and a half years, while signaling that additional increases could follow amid stronger economic growth and persistent price pressures. However, this view was challenged by softer inflation data, as headline annual inflation slowed to a three-month low of 2.8% in July, down from 3.2% in June and below expectations of 3%.

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Trade of The Day – AUD/JPY

Facts

  • AUDJPY returned today above the 200-day exponential moving average (EMA200; black).
  • Daily RSI[14] fell over the past week from approx. 65 to approx. 34.
  • Interest rates in Australia remain higher than in Japan (4.35% vs. 1.00%).

Recommendation

  • Position: Long (BUY) on AUDJPY at market price
  • Target Price (Take Profit; TP): 112.575 (TP1), 113.465 (TP2)
  • Stop Loss (SL): 109.620

Source: xStation5

Opinion

Recent currency interventions on the yen and a unified narrative from Japanese and US authorities standing behind the Japanese currency (US Treasury Secretary Bessent today: “The United States will do everything in its power to support the yen”) led to a sharp sell-off in JPY-led pairs (AUDJPY: -3.5%, USDJPY: -3.9%, EURJPY: -2.6% change over the past week). The determination communicated by Tokyo and Washington should limit speculative selling of the yen; however, a sustained recovery in the Japanese currency will likely only be possible following stabilization in the bond market and a clear hawkish turn by the Bank of Japan. With current interest rates (Australia: 4.35%, Japan: 1.00%), the recent AUDJPY sell-off enhances the appeal of the carry trade, even in light of recent, fairly dovish remarks from the RBA. A rebound off the 200-day EMA (black), combined with a global increase in risk appetite (gains in risk assets, falling oil prices, de-escalation in the Middle East), should therefore motivate at least a local upward correction in AUDJPY. This is further supported by the fact that AUDUSD itself remains in an uptrend (trading above the EMA30 and EMA100 on the daily interval), bolstered by the recent decline in US rate hike expectations.

Methodology

This recommendation was prepared based on a technical analysis of the AUDJPY chart and a fundamental analysis of the respective economies (monetary policy in Japan, Australia, and the US). The directional bias was determined using moving averages and market expectations regarding central bank policies. Take Profit and Stop Loss levels were established using Fibonacci retracements and price action:

  • TP1 is set at the 38.2% Fibonacci level.
  • TP2 is set at the 23.6% Fibonacci level.
  • SL is placed between the 100% and 78.6% Fibonacci levels, slightly below the EMA200.