The Indian Rupee (INR) edged lower against the US Dollar (USD) on Thursday, weighed down by renewed demand for the greenback from foreign banks and oil companies. Added pressure stemmed from foreign equity outflows and position adjustments in offshore non-deliverable forwards (NDF) ahead of the Reserve Bank of India’s (RBI) monetary policy decision scheduled for Friday.
Despite these headwinds, the Indian currency may find some near-term support amid concerns over US President Donald Trump’s unpredictable tariff policies and rising fiscal deficits. These worries have tempered broader USD strength, particularly after the US House of Representatives passed a sweeping tax cut and spending bill, further exacerbating deficit concerns.
Investor focus now turns to several key economic events. The US Balance of Trade and Initial Jobless Claims are due Thursday, while Friday brings the RBI’s interest rate decision. Markets expect the central bank to announce a third consecutive 25 basis point rate cut. Meanwhile, US labor data — particularly the May Nonfarm Payrolls (NFP) report — will also draw attention. Analysts anticipate 130,000 new jobs and an unchanged unemployment rate of 4.2%.
INR Under Pressure Despite Domestic Growth
According to a Reuters poll, the Indian Rupee is expected to make modest gains this year, but likely underperform most Asian currencies as the USD eases. So far, the INR has shown minimal improvement in 2025, despite a strong final-quarter GDP print.
On the data front, India’s economic momentum showed signs of cooling. The HSBC Composite Purchasing Managers Index (PMI) slipped to 59.3 in May from 61.2 in April, while the Services PMI dropped to 58.8, missing expectations. However, international demand remained resilient, with HSBC’s Chief India Economist Pranjul Bhandari noting continued strength in new export business.
In contrast, the US economy presented mixed signals. The ISM Services PMI dropped below the 50-mark to 49.9, indicating contraction. Additionally, ADP private sector employment rose just 37,000 in May, missing forecasts of 115,000. Minneapolis Fed President Neel Kashkari acknowledged signs of labor market cooling and emphasized a cautious approach to future rate moves.
Technical Outlook: USD/INR Breaks Above Key Level
The USD/INR pair has resumed its upward trend, rising above the crucial 100-day Exponential Moving Average (EMA) on the daily chart. The 14-day Relative Strength Index (RSI) also remains elevated at 57.60, reflecting ongoing bullish momentum.
Key resistance is seen at the psychological level of 86.00, marked by the June 4 high. A sustained move above this level could open the door to 86.71 (April 9 high) and further to 87.30 (March 12 high).
On the downside, immediate support lies at 85.30, the low from June 3. A break below that level may trigger a slide toward 85.04 (May 27 low), with further losses potentially extending to 84.61 — the low recorded on May 12.
As markets await central bank decisions and key labor data, traders are bracing for increased volatility in the USD/INR pair in the days ahead.
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