The Indian Rupee (INR) remained stable against the US Dollar (USD) during Friday’s Asian trading session, with the USD/INR pair hovering near a seven-week low of 86.20 recorded on Thursday. However, further downside may be limited as the Greenback gains strength amid global risk aversion driven by US tariff policies.
Headwinds for INR: Rising Oil Prices and Geopolitical Tensions
The INR faces pressure from rising crude oil prices, as India—the world’s third-largest oil consumer—is particularly vulnerable to energy costs. Escalating geopolitical tensions have also contributed to market volatility, with Israel launching a new ground offensive in Gaza and the US conducting airstrikes against Iran-backed Houthi rebels in Yemen.
Foreign Investor Flows and RBI Policy
Despite global uncertainty, Indian equities have gained ground, supported by Foreign Portfolio Investors (FPI), who turned net buyers in two of the past four sessions. Market participants are closely watching investor flows ahead of the FTSE March semi-annual review, with IIFL projecting $1.4 billion in net inflows into Indian markets.
Technology stocks led the rally, mirroring gains in US markets, while banking stocks maintained upward momentum amid slowing inflation. This has allowed the Reserve Bank of India (RBI) to take a more accommodative stance toward the INR.
The RBI recently implemented its first rate cut in nearly five years, aligning with expectations. With liquidity concerns persisting, further easing is anticipated to support economic growth. India’s GDP expanded by 6.5% in the current financial year, down from 8.2% in the previous period.
US Dollar Outlook: Strength Amid Economic Uncertainty
The US Dollar Index (DXY) traded near 103.90, buoyed by safe-haven demand. However, declining US bond yields could cap USD gains, as investors shift towards Treasuries amid economic uncertainties.
Federal Reserve (Fed) Chair Jerome Powell reiterated that the inflationary impact of tariffs would be temporary but acknowledged challenges in assessing broader economic effects. While recession risks have risen, Powell maintained that they remain relatively low.
Meanwhile, US Initial Jobless Claims rose to 223K for the week ending March 15, slightly missing estimates, while the Philadelphia Fed Manufacturing Survey for March declined for the second consecutive month to 12.5, though it remained above expectations.
US President Donald Trump has urged the Fed to cut interest rates, citing the economic impact of tariffs. In a post on Truth Social, Trump stated that the Fed should act soon as tariffs begin to affect the economy.
Technical Analysis: USD/INR Eyes 86.00 Support Level
The USD/INR pair trades around 86.30, with technical indicators suggesting a strengthening bearish bias. The pair remains within a descending channel pattern, while the 14-day Relative Strength Index (RSI) hovers slightly above the 30 mark, indicating potential oversold conditions.
Immediate support is seen at 86.14, with further downside extending to the key psychological level of 86.00. On the upside, resistance is expected at the nine-day Exponential Moving Average (EMA) of 86.57, with a break above this level potentially pushing the pair toward 87.10.
Overall, while the USD/INR pair remains under pressure, geopolitical tensions, oil price fluctuations, and Fed policy expectations will play a crucial role in determining its next move.
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