The Indian Rupee (INR) extended its losing streak against the US Dollar (USD) for the sixth consecutive session on Monday, pressured by sustained demand for the Greenback from importers and persistent foreign fund outflows. The USD/INR pair traded near 85.60, reflecting a continued bearish tone for the Indian currency.
Despite recent weakness in the US Dollar—triggered by a credit rating downgrade—its upside against the Rupee remains supported by broader macroeconomic forces. Moody’s Investors Service downgraded the United States’ long-term credit rating by one notch, citing escalating debt levels and rising interest obligations. The move follows earlier downgrades by Fitch in 2023 and Standard & Poor’s in 2011.
Moody’s now forecasts US federal debt to surge to 134% of GDP by 2035, up from 98% in 2023. The budget deficit is projected to widen to nearly 9% of GDP, driven by surging debt-servicing costs, increasing entitlement expenditure, and falling tax revenues.
Nonetheless, a decline in global crude oil prices is offering some relief to the INR. Reports of renewed progress in US-Iran nuclear negotiations—spurred by Iran’s reaffirmation of its commitment to dialogue—have fueled hopes of increased oil supply, placing downward pressure on prices. As the world’s third-largest oil importer, India benefits from lower crude prices, which help curb its trade deficit and support the Rupee.
Meanwhile, the US Dollar Index (DXY), which tracks the greenback against a basket of six major currencies, slipped to around 100.80. Weak US economic data has intensified market speculation over potential Federal Reserve interest rate cuts later this year. Notably, the University of Michigan’s Consumer Sentiment Index dropped sharply to 50.8 in May, its lowest reading since June 2022 and the fifth monthly decline in a row, defying expectations for an uptick to 53.4.
However, the Dollar found some footing amid signs of easing global trade tensions. Preliminary agreements between Washington and Beijing suggest significant mutual tariff reductions—US duties on Chinese goods may be cut from 145% to 30%, while China could reduce tariffs on American imports from 125% to 10%. Market sentiment is also buoyed by renewed optimism surrounding US-Iran nuclear talks and a proposed summit between US President Donald Trump and Russian President Vladimir Putin aimed at easing the Ukraine crisis.
In domestic markets, India’s benchmark BSE Sensex climbed 3.6% last week, recovering from the previous week’s losses. The rally was supported by de-escalating tensions with Pakistan, positive signals on India–US trade relations, and expectations of accommodative monetary policy from the Reserve Bank of India.
Looking ahead, Commerce and Industry Minister Piyush Goyal is leading a high-level Indian delegation to the United States for trade discussions. Scheduled to meet with US Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick through May 20, Goyal is expected to advance negotiations on a proposed bilateral trade agreement.
USD/INR Technical Outlook Remains Bullish
Technically, the USD/INR pair remains within a rising channel, supported by a bullish structure on the daily chart. The 14-day Relative Strength Index (RSI) stays above the 50 mark, indicating continued upward momentum. If the pair breaks above its recent high of 85.90 from May 9, it could climb toward the upper boundary of the channel near 86.40.
On the downside, immediate support is seen at the nine-day Exponential Moving Average (EMA) near 85.30, followed by the lower boundary of the ascending channel at 85.10. A decisive move below this support zone could invalidate the bullish setup and expose the pair to a potential drop toward the eight-month low of 83.76.
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