The USD/INR pair traded in positive territory around 86.70 during the Asian session on Friday, supported by renewed demand for the US Dollar (USD) from importers. Investors are awaiting key data releases, including India’s Wholesale Price Index (WPI) inflation and US Retail Sales for January, for fresh market direction.
US President Donald Trump revealed on Thursday that Indian Prime Minister Narendra Modi had proposed discussions aimed at easing tariffs and increasing US oil and gas imports to reduce the trade deficit between the two nations. Market participants are closely watching developments in US-India trade relations, with any signs of heightened trade tensions potentially strengthening the USD as a safe-haven asset.
Despite holding approximately $800 billion worth of Indian equities, foreign institutional investors (FIIs) have been selling off, raising concerns about the impact on the Indian stock market. Such outflows could pressure the Indian Rupee (INR) and act as a tailwind for the USD/INR pair.
However, the upside for the USD/INR may be capped by the intervention of the Reserve Bank of India (RBI). Since the INR hit a record low of 88 against the USD on Monday, the RBI has ramped up efforts to stabilize the currency, selling USD in both the spot and forward markets to curb further depreciation.
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