The Indian Rupee (INR) weakened on Tuesday as renewed demand for the US Dollar (USD) and rising crude oil prices exerted pressure on the local currency. Strategists at Barclays Bank Plc forecast continued underperformance of the INR, despite the USD facing broader market headwinds. They noted, “The Reserve Bank of India (RBI) is expected to focus on replenishing its foreign exchange reserves while allowing its forwards book to run off.”
Despite these challenges, robust GDP growth data from India and capital inflows linked to the rebalancing of a global equity index could provide some relief for the rupee. Investors will also watch closely for the US JOLTs Job Openings report due later on Tuesday. Key events later this week include the RBI’s interest rate decision and the US May employment report, with the Indian central bank widely expected to implement a third consecutive 25 basis points rate cut to stimulate growth.
The rupee’s decline on Tuesday coincided with a surge in crude oil prices. Meanwhile, the Trump administration has requested its trade partners to submit their best offers by Wednesday to finalize trade deals before the July 8 deadline, according to Reuters.
India’s economy expanded 7.4% year-on-year in the first quarter of 2025, up from 6.2% in the previous quarter and surpassing forecasts of 6.7%. While India remains the fastest-growing major economy globally, growth has moderated significantly from the 9.2% pace recorded in fiscal year 2023-24.
In the US, the Manufacturing Purchasing Managers Index (PMI) dropped to 48.5 in May from 48.7 in April, missing expectations of 49.5, according to the Institute for Supply Management.
Technical indicators show the USD/INR pair maintaining bearish momentum, capped below the 100-day Exponential Moving Average (EMA) on the daily chart. However, short-term consolidation or a modest recovery remains possible, with the 14-day Relative Strength Index (RSI) hovering near the midpoint.
The immediate bearish targets for USD/INR are the 85.05-85.00 zone, marking the May 27 low and a psychologically important level. A further decline could push the pair toward 84.61, the May 12 low, with a key support at 83.85, the lower boundary of the current trend channel.
On the upside, the critical resistance lies between 85.55 and 85.60, where the 100-day EMA aligns with the upper trend channel limit. A decisive breakout above this zone could open the path for a retest of the May 22 high at 86.10.
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