The Indian Rupee (INR) edged lower against the US Dollar (USD) during Asian trading on Tuesday. However, the USD/INR pair faces resistance, as the INR finds support from various market factors. Investors are closely monitoring the Federal Reserve’s policy announcement, as well as any developments regarding a potential US-India trade agreement and ongoing cross-border tensions.
The downside for the USD/INR pair may be limited by importer hedging demand and potential interventions by the Reserve Bank of India (RBI) to stabilize the Rupee. The central bank has been actively bolstering India’s foreign exchange reserves, which have risen for the eighth consecutive week, reaching a six-month high of $688 billion as of April 25.
Oil Price Recovery and Equity Inflows Support the Rupee
While the Indian Rupee has faced pressure from the global rise in crude oil prices—India being the world’s third-largest oil consumer—gains have been capped by concerns about rising global supply. OPEC+ recently agreed to ramp up production for a second consecutive month, with an additional increase of 411,000 barrels per day (bpd) for June. This decision has weighed on the Rupee as rising oil prices could affect India’s trade balance.
On the positive side, strong equity inflows into India, totaling ₹2,769.81 crore, and the successful launch of a 10-year government bond with a 6.33% coupon have provided support for the Rupee. The bond met market expectations, signaling solid demand and possibly encouraging further foreign investment, which could strengthen the INR.
US Dollar Strengthens Ahead of Fed Policy Decision
The US Dollar Index (DXY), which tracks the USD against a basket of six major currencies, is rebounding after two days of losses, trading near 99.80. The dollar is gaining strength ahead of the Federal Reserve’s policy meeting, where the central bank is expected to leave interest rates unchanged. However, traders are keenly watching for comments from Fed Chairman Jerome Powell, particularly in light of trade-related uncertainties and President Trump’s pressure for rate cuts.
US economic data has shown strength, particularly in the services sector. The ISM Services PMI rose to 51.6 in April, above expectations, while the New Orders Index and Services Employment Index also posted positive readings. These reports have reinforced the USD’s strength.
On the trade front, Treasury Secretary Scott Bessent indicated that the US is “very close to some deals” with certain countries, adding to optimism about a potential easing of trade tensions. However, President Trump ruled out meeting with Chinese President Xi Jinping this week, and China’s Commerce Ministry is still reviewing the US proposal to resume talks.
Geopolitical Risks and RBI’s Bond Purchases Support INR
Geopolitical risks, especially the escalating tensions between India and Pakistan, could weigh on the Indian Rupee. Over the weekend, Pakistan’s military conducted a training missile launch, while India accused Islamabad of supporting a recent attack on tourists in Kashmir. These developments have added to market uncertainty.
At the same time, the RBI is expected to continue its bond purchases, with ₹750 billion ($8.88 billion) worth of bonds planned this week and additional rounds scheduled later in the month. This liquidity injection is expected to aid policy transmission and support growth, providing some stability to the INR.
Technical Outlook for USD/INR
The USD/INR pair is trading near 84.20 on Tuesday, with technical analysis suggesting a bearish bias as the pair continues to trend lower within a descending channel. On the downside, support lies near the lower boundary of the channel around 84.10. A break below this level could trigger further downward momentum, potentially pushing the pair toward an eight-month low of 83.76.
On the upside, resistance is seen at the nine-day Exponential Moving Average (EMA) near 84.70. A breakout above this level could strengthen short-term bullish momentum, paving the way for a move toward the channel’s upper boundary at 86.20, with further resistance at the two-month high of 86.71.
