The Indian Rupee (INR) climbed to a fresh weekly high near 85.47 against the US Dollar (USD) in early Wednesday trading, supported by cautious optimism following positive signals from the recent US-China trade talks in London. Meanwhile, the US Dollar Index (DXY), which tracks the Greenback against six major currencies, edged up to around 99.15.
US Commerce Secretary Howard Lutnick confirmed that the two nations have agreed on a “framework” to implement the Geneva trade deal reached last month, pending approval by President Donald Trump. Lutnick expressed confidence that China will ease non-tariff barriers on rare earth minerals and magnets exports, while the US would relax export restrictions on advanced chips. The Chinese Ministry echoed optimism, stating the agreement is now set for review by President Xi Jinping.
Despite this positive development, the US Dollar maintained steady trading, reflecting market expectations that the agreement’s success depends on detailed execution and whether it can restore trust between Presidents Xi and Trump, which has frayed since the Geneva announcement, according to analysts at National Australia Bank.
On the legal front, the US Federal Appeals Court ruled that tariffs imposed by President Trump over border concerns and the “Liberation Day” tariffs from April 2 will remain in effect during ongoing legal challenges. A crucial hearing on their legality under emergency powers is scheduled for July 31.
INR Extends Gains Ahead of Key US Inflation Data
The Indian Rupee continued its winning streak for the fifth consecutive day amid expectations ahead of the US Consumer Price Index (CPI) report for May, due Wednesday at 12:30 GMT. The CPI is forecast to show headline inflation rising 2.5% year-on-year, up from 2.3% in April, while core inflation is expected to accelerate slightly to 2.9%.
Higher inflation readings could temper hopes for imminent Federal Reserve rate cuts, though subdued inflation may still keep the Fed cautious about easing policy too quickly. According to the CME FedWatch tool, markets do not expect interest rate reductions at the Fed’s upcoming June and July meetings.
Regionally, robust foreign capital inflows and prospects of declining oil prices are providing additional support to the INR. Data from Indian exchanges revealed Foreign Institutional Investors (FIIs) pumped Rs 2,301.87 crore into equity markets on Tuesday. Furthermore, the US Energy Information Administration (EIA) forecast that Brent crude prices could fall to $61 per barrel by the end of 2025 due to rising supply and weakening demand—good news for India, a major oil importer.
Domestically, investors await India’s CPI data for May, scheduled for release Thursday. Inflation is expected to ease to 3% year-on-year from 3.16% in April, potentially encouraging the Reserve Bank of India (RBI) to consider further rate cuts after last week’s unexpected 50 basis point reduction to 5.5%.
Technical Outlook: USD/INR Faces Resistance at 20-Day EMA
Technically, the USD/INR pair struggled to hold above the 20-day Exponential Moving Average (EMA) around 85.49 during Wednesday’s Asian session, retreating to a weekly low near 85.47. The 14-day Relative Strength Index (RSI) remains neutral in the 40-60 range, signaling sideways movement.
Key support lies at the June 3 low of 85.30; a break below could open the way toward the May 26 low near 84.78. On the upside, surpassing the May 22 high of 86.10 may propel the pair toward an 11-week peak near 86.70.
The INR’s trajectory will remain closely tied to US inflation outcomes and evolving trade relations between the world’s two largest economies.
