On Wednesday during the Asian trading session, the Indian Rupee (INR) showed a downward trend. This came after the rupee had its best monthly increase in over six years, propelled by a weaker US dollar and a fresh wave of foreign investment flowing into Indian equities. However, the near – term future of the INR now hangs in the balance, as market watchers anticipate President Donald Trump’s planned implementation of tariffs on US trading partners, scheduled for the same day.
Analysts are closely monitoring how these tariffs will impact global trade dynamics and economic growth prospects. Traders are bracing themselves for Trump’s tariff announcement later in the day. Additionally, the release of the US March ADP Employment Change data is on the agenda for Wednesday. Throughout the week, remarks from Federal Reserve (Fed) officials will also be under the spotlight.
The Reserve Bank of India (RBI) is set to announce its interest rate decision next week. A Reuters survey of economists predicts that there will be only one more rate cut in August, which, if it happens, would mark the shortest easing cycle in the country’s history. This could potentially put further mild downward pressure on the Indian currency.
In March, the rupee’s performance was remarkable, achieving its best monthly result in more than six years. This was largely due to foreign portfolio and other forms of investment pouring into the country, along with a reduction in bearish bets. Overseas investors purchased nearly $4 billion worth of Indian equities and bonds, a significant shift from the approximately $12 billion in outflows witnessed in January and February.
Kotak Institutional Equities noted in a report that while the rupee has benefited from the recent dollar weakness and the RBI’s allowance of two – way currency movement, the uncertainties surrounding US trade and tariff policies continue to pose key risks to India’s external sector balance.
Trump has stated that he will impose “reciprocal tariffs” on Wednesday. This means that many countries that already have their own duties on US goods could suddenly face new trade barriers. The White House has indicated that these tariffs will come into effect immediately after their unveiling on Wednesday.
US Treasury Secretary Scott Bessent said late on Tuesday that the amounts announced on Wednesday would represent the peak of the tariffs. However, he also mentioned that countries could take measures to reduce these tariff levels.
The US ISM Manufacturing Purchasing Managers Index (PMI) dropped to 49.0 in March from 50.3 in February, falling short of the market consensus of 49.5. Chicago Fed President Austan Goolsbee commented late on Tuesday that while US hard data remains strong, soft data is almost collapsing. He further added that uncertainty is compounded by fears regarding inflation.
Looking at the technical analysis, based on the daily chart, the USD/INR pair maintains a bearish sentiment. The price is trading below the crucial 100 – day Exponential Moving Average (EMA). With the 14 – day Relative Strength Index (RSI) standing below the midline at around 32.90, the path of least resistance seems to be downward. The 85.00 psychological level serves as the initial support level for the pair. Further down, the 84.84 level, which was the low on December 19, acts as an additional downside filter. The next bearish target is set at 84.22, the low on November 25, 2024.
On the upside, the key resistance level for USD/INR is in the 85.90 – 86.00 zone, which represents the 100 – day EMA and a round number. If there is sustained upward momentum, the pair could rise to 86.48, the low on February 21, and potentially rally further to 87.00, a round figure.
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USD/INR Gains Ground Amid Global Trade Jitters; US PMI Data in the Spotlight
USD/INR Softens as Indian PMI Releases Loom
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