The Indian Rupee (INR) weakened on Monday, pressured by escalating border tensions with Pakistan and renewed strength in the US Dollar (USD), which found support from upbeat US-China trade developments and a surge in crude oil prices. These combined factors weighed on the local currency, though downside risks remain cushioned by supportive domestic fundamentals.
Despite the geopolitical strain, foreign portfolio investment (FPI) inflows into Indian equities and a strong corporate earnings season are providing some stability to the INR. Additionally, any significant depreciation is expected to be contained through potential foreign exchange interventions by the Reserve Bank of India (RBI).
Market participants are closely watching India’s Consumer Price Index (CPI) data for April, scheduled for release later today. On the global front, attention is focused on a speech from US Federal Reserve Governor Adriana Kugler and, more critically, Tuesday’s release of the US April CPI report, which could influence expectations around future Fed policy.
Tensions between India and Pakistan flared over the weekend. India accused Pakistan of breaching a ceasefire agreement shortly after both countries’ Directors General of Military Operations (DGMOs) had agreed to halt hostilities. Indian Foreign Secretary Vikram Misri confirmed that Indian forces were instructed to respond firmly to any further violations along the Line of Control (LoC) and the international border.
Meanwhile, the US and China reported “substantial progress” in recent trade talks held in Switzerland. Chinese Vice Premier He Lifeng described the negotiations as “an important first step” toward stabilizing relations, while US Treasury Secretary Scott Bessent echoed optimism over the two-day discussions. The improved sentiment has bolstered global risk appetite and contributed to USD demand.
In the currency markets, the USD/INR pair resumed its upward trajectory, climbing above the 100-day Exponential Moving Average (EMA). However, with the 14-day Relative Strength Index (RSI) lingering near the neutral 50 mark, further consolidation cannot be ruled out.
Technical outlook points to immediate resistance at 86.12, the upper boundary of the current trend channel. A sustained break above this level could open the path toward 86.61—the high from April 10—and further to 87.38, the March 11 peak. On the downside, key support is seen at the psychological 85.00 level, followed by 84.53 (May 8 low) and 84.12 (May 5 low).
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