The Indian Rupee (INR) weakened on Tuesday, pressured by a surge in crude oil prices amid escalating geopolitical tensions in the Middle East. As the world’s third-largest oil consumer, India faces economic headwinds when oil prices rise, negatively impacting the rupee’s value.
However, the local currency’s losses may be cushioned by US Dollar (USD) sales from foreign banks and concerns over slowing US economic growth linked to former President Donald Trump’s trade policies. Additionally, intervention from the Reserve Bank of India (RBI) in the foreign exchange market could help prevent significant depreciation of the rupee.
Market participants are closely watching the US Federal Reserve’s policy decision on Wednesday. The Fed is widely expected to hold its benchmark interest rate steady between 4.25% and 4.50%. Investors will focus on the central bank’s policy guidance, with projections pointing to two quarter-percentage-point rate cuts this year.
INR Faces Pressure Ahead of Fed Decision
“The USD/INR pair is expected to trade within the 86.80–87.40 range in the near to medium term,” said Amit Pabari, Managing Director at CR Forex Advisors. “A breakout beyond this band could trigger additional volatility of 30–50 paise in the same direction.”
Domestically, inflation data showed India’s Wholesale Price Index (WPI) rose to 2.38% in February, slightly exceeding expectations of 2.36%. Meanwhile, US economic data signaled weakness, with retail sales rising just 0.2% month-over-month in February, missing the forecast of 0.7%. Year-over-year, retail sales grew 3.1%, down from a revised 3.9% in January.
According to the CME FedWatch tool, markets currently price in a 75% probability of a quarter-point rate cut by June.
USD/INR Uptrend Holds Firm, Technical Indicators Signal Near-Term Pressure
The USD/INR pair maintains its long-term bullish trend, having broken out of a symmetrical triangle on the daily chart. The pair remains above the key 100-day Exponential Moving Average (EMA), reinforcing its upward momentum. However, near-term downside pressure persists, with the 14-day Relative Strength Index (RSI) sitting below the midline at 43.65.
Key resistance for USD/INR lies at 86.90, with a sustained move above this level potentially pushing the pair toward 87.38 (March 11 high) and further to 87.53 (February 28 high). On the downside, immediate support is at 86.48, with a drop below this level exposing 86.14, the low from January 27.
Traders remain on high alert for volatility as global economic developments and central bank policies shape the rupee’s trajectory.
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