The Indian Rupee (INR) lost momentum on Wednesday, undermined by strong month-end demand for the US Dollar (USD) from local oil companies and importers. The Greenback’s recovery against major currencies further pressured the INR. Additionally, sustained increases in crude oil prices, which impact India as the world’s third-largest oil consumer, may continue to weigh on the local currency.
However, gains in Indian stock markets, bolstered by renewed buying from foreign institutional investors (FIIs), provided some support for the INR. Market attention also turned to upcoming US economic data, including the Mortgage Applications and Durable Goods Orders reports, as well as speeches from Federal Reserve officials, such as Neel Kashkari and Alberto Musalem.
INR Faces Pressure from Strong USD Demand and Crude Price Surge
Liquidity conditions in India’s financial system are expected to ease due to the Reserve Bank of India’s (RBI) Open Market Operations (OMO) purchases worth Rs 500 billion and a US$10 billion FX buy/sell swap. “There was month-end demand, particularly from oil companies, and likely dollar demand from the Reserve Bank to close its open short positions due in March,” said Anil Bhansali, head of treasury at Finrex Treasury Advisors.
US President Donald Trump announced on Wednesday plans to implement copper import tariffs within weeks, according to Bloomberg. Meanwhile, US economic data showed that consumer confidence fell for the fourth consecutive month, hitting a 12-year low at 92.9 in March, lower than the expected 94.5. On a positive note, US New Home Sales rose 1.8% in February, reaching an annualized rate of 676,000 units, according to the Commerce Department.
USD/INR Outlook Remains Bearish, But Oversold Conditions Signal Caution
The INR continued to soften, with the USD/INR pair holding a bearish outlook, remaining below the 100-day Exponential Moving Average (EMA) on the daily chart. However, the 14-day Relative Strength Index (RSI) dipped below the 30.00 mark, signaling oversold conditions and suggesting that a period of consolidation or a temporary recovery could be on the horizon.
Key support levels for the pair include the January 6 low at 85.60. If bearish pressure persists, the pair could slide toward the December 19, 2024, low at 84.84, and further south to the November 25, 2024, low of 84.22. On the upside, the 85.95-86.00 range, including the 100-day EMA, presents a key resistance zone. A decisive break above this could push the pair toward the next targets at 86.48 and 87.00.
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