The Indian Rupee (INR) edged higher against major currencies in early European trading Monday, buoyed by upbeat investor sentiment and moderating inflation expectations. EUR/INR dipped 0.07% to 92.69, reversing Friday’s gains, while GBP/INR fell 0.14% to 110.86, as traders awaited fresh catalysts from global macroeconomic data.
Currency Dynamics in Focus
The Rupee’s resilience reflected improving confidence in India’s economic outlook, with GDP growth projected at 6.8% in 2025. Foreign institutional inflows, totaling $4.2 billion in March, further supported the currency, as investors flocked to equities and government bonds.
“India’s robust growth trajectory and stable policymaking are attracting sustained foreign investment,” noted Siddharth Sharma, an economist at ICICI Securities. “However, external headwinds like oil prices and U.S. tariff policies remain key risks.”
Factors Shaping INR Performance
Oil Prices: India’s heavy reliance on imports makes the Rupee sensitive to crude fluctuations. Brent crude’s retreat below $85/barrel eased pressure on the current account deficit, providing temporary relief.
Inflation Outlook: March CPI data, due Thursday, is expected to show inflation cooling to 4.2%, aligning with the Reserve Bank of India’s (RBI) target. Lower inflation could delay rate hikes, supporting risk assets.
Seasonal Demand: Import-heavy sectors like energy and electronics typically boost dollar demand in Q2, but pre-election spending by the government may offset some depreciation pressure.
Technical Analysis
EUR/INR faces immediate support at 92.50, coinciding with the 50-day moving average. A break below this level could trigger a test of 92.20, while resistance lies at 93.00. GBP/INR’s 110.50–111.00 range suggests consolidation, with momentum favoring the Rupee in the near term.
Global Context
The U.S. Dollar Index’s weakness (103.80) and dovish Fed signals further benefited emerging market currencies like the INR. However, Wednesday’s U.S. tariff announcement poses a wildcard, with potential retaliatory measures threatening export-oriented economies.
Investor Strategy
Traders are advised to monitor RBI Governor Shaktikanta Das’ speech on Tuesday for clues on monetary policy. Additionally, April’s FOMC meeting and U.S. debt ceiling negotiations will shape broader market sentiment.
Conclusion
The Rupee’s short-term gains reflect improving fundamentals, but external risks demand caution. A balanced approach—hedging against volatility while capitalizing on structural inflows—remains prudent for investors.
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