The Indian Rupee (INR) gained ground during Wednesday’s Asian trading session, with the USD/INR pair depreciating despite rising geopolitical tensions between India and Pakistan. Currency expert Dhiraj Nim from ANZ Bank suggested that the Reserve Bank of India (RBI) might intervene aggressively if market conditions become highly volatile.
This follows India’s military action under “Operation Sindoor,” which targeted nine sites in Pakistan and Pakistan-administered Kashmir. The operation was in response to a deadly militant attack on tourists in Indian-administered Kashmir on April 22, which killed 25 Indians and one Nepali national. Pakistan condemned the strikes, calling them “unprovoked” and vowing retaliation, raising concerns of escalating tensions.
The Indian Rupee has also benefited from domestic economic factors, including relatively strong performance in India’s assets and limited capital outflows. The country’s low reliance on exports has shielded it from the impact of aggressive US tariffs. Meanwhile, increased oil output from OPEC+ and weakening US growth concerns have helped lower crude and fuel prices, reducing India’s import costs.
Data released recently showed that India’s inflation rate dropped to its lowest level in more than five years in March, falling below the RBI’s 4% mid-point target. However, GDP growth slowed to 6.5% in the last fiscal year, down from 8.2% previously, prompting the central bank to prioritize economic growth over inflation control.
Despite these supportive factors, the USD/INR pair has risen, driven by importer hedging demand and expectations of dollar-buying interventions by the RBI, which is expected to continue bolstering its foreign exchange reserves.
US Dollar Strengthens Ahead of Federal Reserve Decision
The US Dollar (USD) has strengthened as traders remain cautious ahead of the Federal Reserve’s interest rate decision later today. The Fed is widely expected to leave rates unchanged, but attention will be focused on comments from Chair Jerome Powell, particularly regarding future rate cuts and the broader economic outlook amid trade-related uncertainties.
Additionally, the US Dollar has benefited from recent strong US economic data. The ISM Services PMI for April rose to 51.6, beating expectations, while the New Orders Index and the Services Employment Index also showed strength, supporting the USD.
In geopolitical developments, US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer are set to meet with Chinese Vice Premier He Lifeng in Geneva over the weekend. This marks the first high-level talks since the US imposed tariffs, which had escalated tensions in the global trade landscape. China has agreed to engage in negotiations, further improving risk sentiment.
Meanwhile, India is preparing for a nationwide mock drill on Wednesday, testing air-raid sirens and evacuation procedures in response to heightened tensions with Pakistan. This drill, the first of its kind since 1971, reflects the growing security concerns in the region following the April 22 terror attack.
USD/INR Faces Technical Resistance and Support
From a technical perspective, the USD/INR pair is hovering near 84.60, with daily charts showing a continued bearish outlook as the pair remains within a descending channel pattern. Immediate support is located near 84.10, the lower boundary of the channel, and a break below this level could trigger further downside, possibly pushing the pair towards the eight-month low of 83.76.
On the upside, resistance is seen near the nine-day Exponential Moving Average (EMA) around 84.69. A sustained move above this level could spark short-term bullish momentum, potentially targeting the upper boundary of the descending channel near 86.20, with additional resistance at the two-month high of 86.71.
Traders are also monitoring the ongoing RBI bond purchases and geopolitical developments, which could influence the INR’s movements in the coming days.
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