- Indian rupee opens in a weak note against the US dollar, since the latter wins in an environment of risk aversion in the market.
- Trump announces 30% tariffs on EU and Mexico imports.
- Investors expect the India-EE.U IPC data. For June.
The Indian rupee (INR) opens down the US dollar (USD) at the beginning of the week, taking the USD/INR to a level close to 86.15. It was expected that the torque opened positively as the US dollar (USD) extends its rise in a greater demand for shelter assets, after the announcement of higher import tariffs by the president of the United States (USA), Donald Trump, to key commercial partners, the European Union (EU) and Mexico.
At the time of writing, the American dollar index (DXY), which tracks the value of the dollar against six main currencies, is firmly negotiated about 98.00, the highest level seen in more than two weeks.
During the weekend, the US president, Trump, revived the global commercial nerves after sending letters to the European Union (EU) and Mexico, dictating 30% tariffs that will be separated from the sector taxes and warning that any reprisal measure will be answered with additional increases in import tariffs.
The announcement has led to a strong fall in the riskiest assets. Futures of US shares have expanded Friday’s losses, and coins received as risk, such as Indian rupee, are low performance, demonstrating an environment of risk aversion in the market.
Last week, President Trump also announced 25% tariffs to Japan and 35% to Canada, along with 50% to copper imports.
What moves the market today: Indian rupee faces pressure before the Indian CPI data
- Indian rupee is negotiated downward against the US dollar and its European peers as investors become aES -aakers to risk and uncertainty surrounds the commercial agreement between the US and India. President Trump has several occasions that Washington is close to ensuring a commercial pact with India, but has not officially announced it.
- However, a Bloomberg report during the weekend has also increased confidence in the US and India are close to reaching a commercial agreement, since it indicated that the South Asia Nation does not expect to receive a letter of demand for tariffs.
- The Bloomberg report also indicated that Trump will impose tariffs below 20% to India. Such scenario will put the nation in a favorable position against economies such as Vietnam and Bangladesh, which have received higher tariffs. Since India is a key exporter of textiles and clothing to the USA along with Vietnam and Bangladesh, the imposition of lower tariffs to India will be a competitive advantage for Indian textile exporters.
- In the domestic field, investors expect inflation data from the wholesale price index (WPI) and the consumer price index (ICC) for June, which will be published during the day. It is estimated that WPI inflation has grown at a faster rate of 0.52%, compared to a growth of 0.39% seen in May.
- Investors will closely monitor the data of the Indian CPI, which is expected to have moderately increased a 2.5% year -on -year compared to the growth of 2.82% seen in May. This would be the fifth consecutive month in which the General CPI would remain below the 3.7% objective of the Indian Reserve Bank (RBI) for the current fiscal year, which was established at the June policy meeting after anticipating cuts in interest rates.
- In the US, investors will also focus on IPC data for June, which will be published on Tuesday. The IPC report is expected to show that price pressures grew at a faster rate, a scenario that will discourage federal reserve officials (FED) to cut interest rates at the September meeting. According to the CME Fedwatch tool, there is a 62.8% probability that the FED reduces interest rates in September.
Technical analysis: the USD/INR recovers a maximum of two weeks above 86.00
The USD/INR pair reviews a maximum of more than two weeks of around 86.15 on Monday. The short -term perspective of the torque is bullish, since the 20 -day exponential mobile average (EMA) acts as a key support around 85.90
The 14-day relative force (RSI) index oscillates within the range of 40.00-60.00, suggesting that the asset lacks impulse in any direction.
Looking down, the minimum of May 27, 85.10 will act as a key support for the main one. On the positive side, the minimum of June 24 at 86.42 will be a critical obstacle to the pair.
Indian Rupia – Frequently Questions
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.
