- The Indian rupee gives in the Asian session on Tuesday.
- Moderate bets for the RBI weigh on the INR, but a commercial agreement between the US and India in multiple phases could limit their losses.
- Investors prepare for Fed speeches later on Tuesday.
Indian rupee (INR) weakens on Tuesday. Consumer inflation in India fell more than expected to a minimum close to six years in April, strengthening the bets that the Bank of the Indian Reserve (RBI) is about to extend its cycle of feat cuts. This, in turn, undermines the Indian coin. In addition, renewed concerns about the possible reintroduction of commercial tariffs by the Trump administration could exert some sales pressure on Asian pairs, including the INR.
However, a fall in crude oil prices could help limit local currency losses, since India is the third largest oil consumer in the world. The lowest prices of crude oil tend to have a positive impact on the value of the INR. A commercial agreement in multiple phases between the US and India could also support the local currency.
Investors will be attentive to the Fed speeches later on Tuesday. The following federal reserve officials (FED) are scheduled to speak, including Thomas Barkin, Alberto Musalem, Adriana Kugler, Raphael Bostic, Mary C. Daly and Beth M. Hammack.
Indian rupee remains weak amid discussions on the commercial agreement
- India is discussing a commercial agreement with the US structured in three sections and hopes to reach a provisional agreement before July, when Trump’s reciprocal tariffs are expected to enter into force, according to Bloomberg.
- The provisional agreement would most likely cover areas that include access to the market for industrial goods, some agricultural products and address some non -tariff barriers, such as quality control requirements, people said, which asked not to be identified because the discussions are private.
- ICRA predicted on Monday a 6.9% Indian GDP growth in the quarter that ended on March 31, and 6.3% for the full fiscal year 2024-25, below the estimates of the National Statistics Office (NSO) held in February.
- Moody’s reduced the US rating of ‘AAA’ A ‘AA1’, citing that the successive US administrations had not managed to reverse the deficits and interest costs increasing.
USD/INR keeps the bass vibra below the key em.
Indian rupee quotes in a weaker tone in the day. The bassist perspective of the USD/INR torque is maintained, since the price remains limited below the 100 -day exponential (EMA) mobile average in the daily chart. However, greater consolidation or temporary recovery cannot be ruled out, since the 14 -day relative force (RSI) index is maintained around the midline.
The first downward objective to be observed for the USD/INR is 85.00, the psychological level. If the price breaks below the level mentioned, the torque could visit 84.61, the minimum of May 12, followed by 84.20, the lower limit of the trend channel.
On the other hand, the sustained trade above the 100-day EMA at 85.60 could open the door to a movement towards the area of 86.00-86.05, which marks both a round figure and the upper limit of the trend channel.
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.
