The Indian Rupee (INR) is slightly weaker against the US Dollar (USD) in Tuesday’s Asian trading session. However, the USD/INR pair is likely to face resistance, as several market factors provide support for the INR. Investors are closely monitoring the Federal Reserve’s upcoming policy decision, potential progress in US-India trade discussions, and the ongoing geopolitical tensions between India and Pakistan.
The downside for the USD/INR pair could be limited by importer hedging demands and potential interventions by the Reserve Bank of India (RBI) in the foreign exchange market. The RBI is expected to continue its efforts to bolster India’s foreign exchange reserves, which recently hit a six-month high of $688 billion as of April 25, marking an eighth consecutive week of growth.
Crude oil prices, however, remain a pressure point for the INR. As the world’s third-largest oil consumer, India is particularly sensitive to rising oil costs. While oil prices have been pushing higher, recent gains were tempered by concerns over increased global supply following an OPEC+ decision to boost production by 411,000 barrels per day (bpd) for June.
The INR has received some support from strong equity inflows, totaling ₹2,769.81 crore. Additionally, the successful launch of a new 10-year government bond with a 6.33% coupon, which met market expectations, could further bolster foreign investment and strengthen the Rupee.
As the US Dollar Index (DXY) rebounds from two consecutive sessions of losses, trading near 99.80, the USD is gaining strength ahead of the Federal Reserve’s policy announcement. While the Fed is widely expected to maintain interest rates, traders are closely watching comments from Fed Chair Jerome Powell, particularly in light of tariff uncertainties and pressure from President Donald Trump to cut rates.
On the trade front, US Treasury Secretary Scott Bessent indicated that the US is close to finalizing trade deals, while President Trump hinted at progress in negotiations. However, Trump has ruled out a meeting with Chinese President Xi Jinping this week. China’s Commerce Ministry also stated it is reviewing a US proposal to resume trade talks.
Positive US economic data, including a stronger-than-expected ISM Services PMI for April, has further supported the USD. Meanwhile, traders expect India’s 10-year government bond yield to remain within the 6.30%-6.40% range this week, with particular focus on bond purchases and developments in India-Pakistan relations.
Tensions between India and Pakistan continue to weigh on investor sentiment. Pakistan recently conducted a missile test, while India has accused Pakistan of supporting an attack on tourists in Kashmir, further complicating the economic environment for the INR.
From a technical perspective, the USD/INR pair is trading near 84.20, and the ongoing bearish trend within a descending channel suggests the potential for further downside. Immediate support lies around 84.10, with a break below this level potentially pushing the pair toward the eight-month low of 83.76. On the upside, resistance is seen at the nine-day Exponential Moving Average (EMA) near 84.70, with a breakout above this level opening the door for a move toward the channel’s upper boundary near 86.20. Further resistance is located at the two-month high of 86.71.
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