- Indian rupee is under renewed pressure as geopolitical tensions intensify between India and Pakistan.
- India’s announcement to neutralize military threats along its northern and west borders has increased risk aversion in domestic markets.
- The Indian reserve bank is expected to intervene, pointing out its intention to stop excessive depreciation of the rupee.
Indian rupee (INR) loses ground against the US dollar (USD), extending its losses per fourth consecutive session on Friday. The USD/INR pair opened with an upward gap after a gain of approximately 1% on the previous day. The operators will probably wait for the Indian currency reservation data that will be published later in the day.
The INR faces renewed pressure in the midst of growing geopolitical tensions between India and Pakistan. India informed having neutralized military threats along its northern and west borders, which triggered risk aversion in domestic markets. The feeling of the market was even more altered by media reports on Indian air attacks and Pakistan’s claims to have demolished drones, intensifying investors’ concerns and weighing about the INR.
An operator indicates that it is very likely that the Indian Reserve Bank (RBI) intervenes to indicate its lack of disposition to tolerate the uncontrolled depreciation of the rupee. Without the support of the RBI, he warns, there is a real risk that the USD/INR pair accelerates even more upwards.
The volumes in the options of the Indian rupee were fired after the attacks of India in Pakistan, suggesting that the currency could cross a volatile period due to the increased tensions between the two nuclearly armed neighbors. The increase in volumes did not reveal remarkable directional bias. The division between purchase and sale options remained quite typical. This indicates that the markets are “playing” with volatility instead of positioning themselves for a depreciation of the rupee, Reuters cited a senior currency operator in a bank.
The USD/INR can be seen due to a stronger US dollar (USD), driven by the hard line of the Federal Reserve (Fed), and the increase in prices of crude oil adds pressure on the Indian rupee. While the INR is expected to continue under stress, the potential support of foreign institutional investors (FII) entries could limit the downward risk unless tensions intensify even more throughout the control line.
Indian rupee depreciates as the US dollar rises after US solid data.
- The US dollar index (DXY), which measures the value of the US dollar (USD) compared to a foreign exchange basket, is being negotiated around 100.60, driven by solid economic data from the US. that limits market enthusiasm.
- American citizens who present new unemployment insurance requests decreased to 228K for the week ending on May 3. This figure was slightly below the initial estimates and was lower than the unvisable total of the previous week of 241K. The report also highlighted an seasonally adjusted unemployment rate of 1.2%, while the four -week mobile average increased by 1k to 226k from the unpaid average of the previous week. In addition, continuous unemployment requests decreased by 29K, reaching 1,879m for the week ending on April 26.
- President Trump has adopted a firm position on China’s commercial policy, after the appointment of a new envoy to Beijing. While there are discussions about tariff exemptions, the administration seems cautious, with Trump stating that “they are not looking for so many exemptions.”
- According to the Global Times, citing the China Embassy in the United States, Beijing is unlikely to reduce tariffs before the next conversations in Switzerland. This adds uncertainty to the market and decreases the feeling of risk.
- The Fed maintained stable interest rates at 4.25% –4.50% on Wednesday, but its statement recognized the growing risks related to inflation and unemployment, injecting new uncertainty in the markets. According to the CME Fedwatch tool, market participants still anticipate a cut of a quarterfinal in July.
- The president of the FED, Jerome Powell, said during the press conference that the US commercial tariffs could hinder the objectives of the Fed for inflation and employment in 2025. Powell indicated that the persistent instability of the policy could force the Fed to adopt a more patient posture of “waiting and seeing” about future tax settings.
- The secretary of the US Treasury, Scott Besent, and the commercial representative Jamieson Greer will meet with the viceprimer Chinese minister He Lifeng in Geneva during the weekend, marking the first high -level conversations since the US imposed tariffs that climbed into a global commercial dispute.
- India and Pakistan exchanged accusations about cross -border drones on Thursday. According to the Indian army, the Armed Forces of Pakistan carried out multiple attacks using drones and other ammunition throughout the Western border of India during the night from Thursday to Friday.
- The Indian government confirmed that it had attacked radars and air defense systems in multiple locations in Pakistan, in retaliation for the attempt of Pakistan of attacking several military objectives in the north and west of India.
- Merchants anticipate that the yield of the government’s bonds to India will remain in the range of 6.30% –6.40% this week, with attention focused on bond purchases and geopolitical developments between India and Pakistan.
- The recent drop in yields is promoted by the expectations of additional cuts of fees and the Bank of the India Reserve (RBI) maintaining a surplus liquidity in the banking system through open market operations (omos) in progress, according to Reuters.
USD/INR rises to about 86.00, upper limit of the ascending channel
Indian rupee continues to weaken, with the USD/INR pair negotiating about 85.90 on Friday. The technical indicators in the daily graphic maintain a bearish bias, since the pair remains confined within a descending channel. However, a change in the impulse is insinuated by the 14 -day relative force (RSI) index, which has risen above level 50, suggesting an emerging upward feeling.
The immediate support is found in the nine -day exponential mobile (EMA) average around 85.05, closely aligned with the key psychological level of 85.00. A decisive breakdown below this area could undermine the short -term bullish attempts and open the door to a fall to the lower limit of the channel about 84.00. A rupture of this level could intensify the sales pressure, potentially leading to the torque towards its minimum of eight months of 83.76.
On the positive side, an upward movement could see the USD/INR to challenge the upper limit of the descending channel around 86.10, with an additional resistance near the maximum of two months of 86.71.
USD/INR: Daily graphic
India Faqs Rupia
Indian rupee (INR) is one of the most sensitive currencies to external factors. The price of crude oil (the country depends largely on imported oil), the value of the US dollar (most of the trade is carried out in US dollars) and the level of foreign investment are all influential factors. The direct intervention of the Bank of the Reserve of India (RBI) in the currency markets to keep the exchange rate stable, as well as the level of the interest rates set by the RBI, are other important factors that influence the rupee.
The Bank of the Reserve of India (RBI) actively intervenes in the currency markets to maintain a stable exchange rate and help facilitate trade. In addition, the RBI tries to maintain the inflation rate in its 4% target adjusting interest rates. Higher interest rates often strengthen rupee. This is due to the role of the “Carry Trade”, in which investors borrow in countries with lower interest rates to place their money in countries that offer relatively higher interest rates and benefit from difference.
Macroeconomic factors that influence the value of rupee include inflation, interest rates, economic growth rate (GDP), trade balance and foreign investment tickets. A higher growth rate can lead to greater investment abroad, increasing the demand for rupee. A less negative trade balance will eventually lead to a stronger rupee. The highest interest rates, especially real types (less inflation interest rates) are also positive for rupee. A risk environment can generate higher direct and indirect foreign investment entries (FI and FII), which also benefit the rupee.
Higher inflation, particularly if it is comparatively higher than other countries, is generally negative for the currency, since it reflects a devaluation through excess supply. Inflation also increases the cost of exports, which leads to more rupees to buy foreign imports, which is negative for Indian rupee. At the same time, higher inflation usually leads to the Bank of the Reserve of India (RBI) to raise interest rates and this can be positive for rupee, due to the increase in demand for international investors. The opposite effect applies to lower inflation.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
