The Indian Rupee (INR) extended its losing streak against the U.S. Dollar (USD) for a fourth straight session on Friday, with the USD/INR pair approaching the 86.00 mark in early trading. The pair opened with a gap higher following a near 1% jump on Thursday, fueled by a combination of rising geopolitical tensions and a resilient U.S. Dollar.
Escalating conflict along the India-Pakistan border has rattled investor sentiment and triggered risk aversion in Indian financial markets. Reports of cross-border drone activity, military strikes, and retaliatory actions by both nations have deepened market concerns, pushing the rupee lower. India confirmed targeted strikes on Pakistani air defense infrastructure, while Pakistan claimed to have downed Indian drones and accused its neighbor of “aggression.”
As tensions flared, options trading volumes in the Indian rupee surged. However, traders indicated there was no strong directional bias, with activity focused more on hedging volatility than speculating on further depreciation. A senior forex dealer quoted by Reuters noted that markets are “playing the volatility,” underscoring the current climate of uncertainty.
The Reserve Bank of India (RBI) is widely expected to intervene to stabilize the currency if necessary. Market participants believe the central bank is unlikely to tolerate unchecked depreciation of the rupee, especially amid fragile investor confidence.
Meanwhile, the USD continues to benefit from a hawkish stance by the Federal Reserve. The central bank left interest rates unchanged at 4.25%–4.50% earlier this week, but its tone remained cautious amid lingering concerns over inflation and the impact of trade policies. Fed Chair Jerome Powell highlighted the risks that trade tariffs pose to employment and price stability, suggesting the Fed is in no rush to ease policy.
Stronger-than-expected U.S. labor market data also supported the dollar. Weekly jobless claims fell to 228,000, below estimates and down from the previous week’s 241,000. Continuing jobless claims dropped to 1.879 million, signaling continued resilience in the labor market.
In addition to geopolitical concerns, rising global crude oil prices have added to the rupee’s woes. India, a major oil importer, remains sensitive to energy price shocks, which can exacerbate trade and fiscal pressures.
Attention now turns to India’s foreign exchange reserves data and the upcoming high-level U.S.-China trade negotiations in Geneva. These talks mark the first major diplomatic engagement since the U.S. imposed tariffs on Chinese goods, sparking global trade tensions. Market watchers are also monitoring foreign institutional investor (FII) flows, which could help cushion the rupee from further downside if geopolitical risks subside.
Technical Outlook:
The USD/INR pair is trading just below the upper boundary of a descending channel, hovering near 85.90. Technical indicators reflect a bullish bias, with the 14-day Relative Strength Index (RSI) now above the neutral 50 level.
Immediate support lies near the nine-day Exponential Moving Average (EMA) at 85.05 and the psychological 85.00 level. A break below this zone could expose the pair to further downside toward 84.00 and potentially the eight-month low of 83.76.
On the upside, a sustained move above 86.10 could open the door for a test of resistance at 86.71, a two-month high. A break above this could shift market sentiment decisively in favor of the bulls.
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