The Indian Rupee (INR) edged higher on Monday, buoyed by sustained foreign institutional inflows and ongoing weakness in the US Dollar (USD). As concerns mount over the economic fallout of new US tariffs, global investors continue to favor emerging markets like India, lending support to the INR.
Market sentiment remains cautious as investors await clarity on whether President Donald Trump’s administration will secure new trade deals amid escalating tariff tensions. These developments have pressured the Greenback, helping the INR maintain a firm tone.
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said the rupee’s rebound is largely driven by a weakening dollar index and expectations of further USD softness. “Foreign Institutional Investors are shifting toward emerging markets due to more favorable conditions and declining yields in the US,” he noted.
Despite the rupee’s recent strength, the Reserve Bank of India (RBI) is reportedly intervening in the foreign exchange market, purchasing USD to manage the pace of INR appreciation. Meanwhile, Moody’s Ratings has revised its growth forecast for India to a range of 5.5%–6.5% for 2025, down from its earlier estimate of 6.6% made in February.
On the US side, hawkish rhetoric from Federal Reserve officials has slightly dampened expectations of an imminent rate cut. San Francisco Fed President Mary Daly signaled the need for caution, suggesting the Fed may scale back its easing plans due to persistent inflationary risks and the unpredictability of US trade policy.
Market expectations still lean toward a Fed rate cut in June, with projections pointing to a full percentage point reduction by year-end. Key data releases this week include the US Richmond Fed Manufacturing Index on Tuesday and India’s HSBC PMI alongside the US S&P Global PMI on Wednesday.
Technical Outlook: USD/INR Under Pressure
The USD/INR pair maintains a bearish bias, trading below the 100-day Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI) remains below the neutral 50 level, hovering near 38.10, reinforcing the downward momentum.
Key support lies in the 85.00–84.95 range, which also marks the lower boundary of the descending trend channel. A decisive break below this zone could trigger a deeper drop toward 84.53—the low from December 6, 2024—and potentially down to 84.22, last seen on November 25, 2024.
On the upside, resistance is expected near 85.87 at the 100-day EMA. A breakout above this level may open the door for further gains toward 86.55, the channel’s upper limit, and 86.71, the high recorded on April 9.
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