- Indian rupee could recover land due to the expected progress in a commercial agreement between the US and India.
- The fall of the USD/INR could be contained due to the demand for coverage of importers and possible interventions to buy dollars by the RBI.
- INR could face difficulties due to improvement in crude oil prices, driven by OPEC+ decision to increase production more quickly.
The Indian rupee (INR) yields to the US dollar (USD) during the Asian hours on Tuesday. However, the USD/INR torque could continue to find resistance as the INR obtains support from certain market factors. Investors are closely observing the Federal Reserve Policy decision, together with any progress in a commercial agreement between the US and India and the cross -border tensions in progress.
The Indian rupee received support from strong capital entries in shares that amounted to ₹ 2,769.81 Crore. In addition, the recent launch of a new 10 -year government bonus with a coupon of 6.33% saw a solid demand and met market expectations. This favorable response could encourage additional foreign investments, further strengthening rupee.
The fall of the USD/INR torque could be limited by the demand for coverage of importers and possible interventions to buy dollars by the Indian Reserve Bank (RBI). The central bank is expected to continue strengthening its foreign exchange reserves, which have increased for eight consecutive weeks, reaching a maximum of more than six months of 688,000 million dollars as of April 25.
In addition, continuous recovery in crude oil prices exerts downward pressure on INR, since India is the third largest oil consumer in the world. However, oil profits were limited by concerns about the increase in global offer after the OPEC+ decision to accelerate production increases. Last week, OPEC+, the organization of oil exporting countries and its allies, agreed to increase production for the second consecutive month, announcing an additional increase of 411,000 barrels per day (BPD) for June.
Indian rupee progresses while the US dollar is appreciated before the Fed policy decision
- The US dollar index (DXY), which measures the US dollar (USD) compared to a basket of six main currencies, is bouncing after two consecutive loss sessions, quoting about 99.80 at the time of writing.
- The US dollar is strengthening before the Federal Reserve Monetary Policy announcement (FED) on Wednesday. While the Fed is expected to maintain interest rates unchanged, the markets are closely observing the comments of President Jerome Powell, particularly amid the uncertainty related to tariffs and the growing pressure of President Donald Trump for feat cuts.
- On the commercial front, Treasury Secretary Scott Besent declared on Monday that the US is “very close to some agreements”, repeating Trump’s comments of the weekend that suggest progress in commercial negotiations. However, Trump ruled out a meeting with Chinese President Xi Jinping this week. The China Ministry of Commerce said Friday that it is reviewing an US proposal to resume conversations.
- The US economic data showed strength in the services sector: the ISM services PMI rose to 51.6 in April, exceeding 50.6 forecasts and increasing from 50.8 in March. The index of new orders increased to 52.3 from 50.4, while the employment index in services rose to 49 from 46.2.
- The operators anticipate that the yield of the government’s bonds to India is maintained 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 timers of fees and the Indian reserve bank (RBI) maintaining a surplus liquidity in the banking system through open market operations (omos) in progress, according to Reuters.
- This week, the RBI plans to buy bonds for a value of ₹ 750 billion (8,880 million dollars), with two additional rounds of ₹ 250 billion each scheduled for later this month. To date, the Central Bank has acquired ₹ 3.65 billion on bonds through Omos and ₹ 388 billion through purchases in the secondary market. This unexpected liquidity injection will probably help the transmission of policies and to boost growth amid global uncertainties, said Radchika Rao, executive director and senior economist at DBS Bank.
- The growing tensions between India and Pakistan could weigh on Indian rupee. On Saturday, the Pakistan army announced that it had carried out a training launch of a surface to surface missile with a range of 450 kilometers. Meanwhile, New Delhi has accused Islamabad of supporting a recent attack on tourists in Kashmir.
The USD/INR could test the lower limit of the descending channel about 84.00
Indian rupee remains stable, with the USD/INR pair quoting about 84.20 on Tuesday. The technical analysis of the daily graphic indicates a continuous bearish bias, since the par tends to go down inside a descending channel pattern.
At the bottom, the USD/INR torque could test the support near the lower limit of the descending channel around 84.10. A decisive breakdown below this level could deepen the bassist impulse, potentially leading to the torque to the minimum of eight months of 83.76.
In the upper part, the initial resistance is found in the exponential (EMA) mobile average of nine days about 84.70. A rupture above this level could strengthen the short -term bullish impulse, opening the road to the upper limit of the channel about 86.20, with additional resistance at a 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.
