The Indian Rupee (INR) weakened on Thursday, pressured by renewed demand for the US Dollar (USD) and the maturity of positions in the non-deliverable forwards (NDF) market. Additionally, foreign investors’ equity sales could further weigh on the INR. However, strong intervention by the Reserve Bank of India (RBI) may help limit losses, while a drop in crude oil prices—following US-led diplomatic efforts to end the Russia-Ukraine war—could provide some relief, as India is the world’s third-largest crude oil consumer.
Indian Prime Minister Narendra Modi is set to meet with several officials from the Trump administration during his visit to Washington, D.C., including Elon Musk, head of the so-called Department of Government Efficiency. According to government sources, discussions with Musk will likely cover Tesla and Starlink’s expansion plans in India. Meanwhile, reports suggest Modi is prepared to cut tariffs in multiple sectors to prevent a potential trade conflict with the US.
India’s retail inflation, as measured by the Consumer Price Index (CPI), eased to 4.31% in January from 5.22% in December, coming in lower than the market forecast of 4.6%. In contrast, US inflation data released on Wednesday showed the CPI rising 3.0% year-over-year in January, exceeding expectations of 2.9%. Core CPI, which excludes food and energy, climbed to 3.3% from 3.2%, surpassing the projected 3.1%. Monthly inflation figures also showed an increase, with headline CPI rising 0.5% in January from 0.4% in December, while core CPI moved up to 0.4% from 0.2%.
Following the inflation data, traders adjusted expectations for Federal Reserve policy, now pricing in just one quarter-point rate cut this year instead of two. Fed Chair Jerome Powell acknowledged progress in controlling inflation but emphasized that further work is needed.
USD/INR Technical Outlook
The USD/INR pair remains in a constructive uptrend, holding above its 100-day Exponential Moving Average (EMA) on the daily chart. The 14-day Relative Strength Index (RSI) remains above the midline at 56.00, suggesting continued upside momentum.
Key resistance is seen at the 87.00 psychological level, with a decisive breakout potentially pushing the pair toward an all-time high of 88.00, and further gains targeting 88.50. On the downside, support is at 86.35, the February low. A break below this level could see USD/INR retreat toward 86.14, the low recorded on January 27.
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