The Indian Rupee (INR) declined on Wednesday after reaching a three-week high in the previous session, as escalating geopolitical tensions in the Middle East weighed on the currency. Additionally, concerns over impending reciprocal tariffs from the United States, set to take effect on April 2 under President Donald Trump’s directive, added to the selling pressure.
Despite these headwinds, the Rupee found some support from a broadly weaker U.S. Dollar (USD) and an increase in exporter-driven USD sales. Furthermore, India’s recent current account data, which recorded a surplus in February, could provide additional strength to the currency.
Market Focus on Fed’s Interest Rate Decision
Investors are now closely watching the U.S. Federal Reserve’s policy decision scheduled for Wednesday. While the Fed is expected to keep interest rates unchanged, market participants will analyze the accompanying press conference and Summary of Economic Projections (SEP), or ‘dot-plot,’ for insights into the central bank’s economic outlook and potential future rate moves.
Key Economic Indicators Influence Market Sentiment
India’s Wholesale Price Index (WPI) inflation rose to 2.38% in February, up from 2.31% in January, according to the Ministry of Commerce and Industry. The reading slightly exceeded market expectations of 2.36%.
Meanwhile, in the U.S., industrial production increased by 0.7% month-over-month in February, surpassing the revised January figure of 0.3% and exceeding market forecasts of 0.2%. However, building permits dropped by 1.2% to an annualized rate of 1.456 million, marking the most significant decline in five months, while housing starts rebounded sharply by 11.2% to 1.501 million after an 11.5% slump in January.
Market expectations for a Fed rate cut in May have risen to 25%, up from 18% a month ago, according to the CME FedWatch Tool.
USD/INR Outlook Remains Bullish in the Long Term
Despite the Rupee’s current weakness, the USD/INR pair maintains a bullish outlook on the daily chart, with prices holding above the 100-day Exponential Moving Average (EMA). However, in the near term, the pair has broken below a symmetrical triangle pattern, and the 14-day Relative Strength Index (RSI) stands at 42.60, suggesting a possible downside continuation.
Key resistance for USD/INR is observed near the 87.00 psychological level, with a sustained move above this threshold potentially opening the door to 87.38, the high from March 11, and 87.53, the February 28 peak.
On the downside, the first support level lies at 86.48, the March 18 low. A break below this could lead to further declines toward 86.14, the January 27 low, and 85.60, recorded on January 6.
As global economic conditions and central bank decisions continue to shape market movements, traders will remain vigilant for further developments affecting the INR.
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