The Indian Rupee (INR) weakened on Tuesday, pressured by rising demand for the U.S. Dollar (USD) and increasing global uncertainties. Investors adopted a more risk-averse stance ahead of the U.S. trade tariffs, expected to be announced on Wednesday, while a spike in crude oil prices added further pressure on the INR. As the world’s third-largest oil consumer, India is particularly sensitive to fluctuations in oil prices.
Domestic Factors Offer Some Support to the Rupee
Despite the external headwinds, easing domestic inflation and the return of foreign inflows into Indian stocks and bonds may help limit the INR’s losses. Traders are also keeping an eye on U.S. economic data, with the U.S. March ISM Manufacturing Purchasing Managers Index (PMI) and the JOLTS Job Openings report due later on Tuesday. Additionally, the final S&P Global Manufacturing PMI will also be published, providing more clarity on the U.S. economic outlook.
India’s Growth Outlook Remains Positive
India’s economy is projected to grow at 6.5% in the fiscal year 2025-26, according to revised estimates from the National Statistical Office (NSO) and EY Economy Watch. This reflects a steady growth momentum despite global uncertainties, including the looming trade tensions.
Trade Tariff Uncertainty Adds to Market Tensions
U.S. President Donald Trump announced late Monday that his reciprocal tariffs plan would target all trading partners, adding more uncertainty ahead of the tariff rollout on Wednesday. The tariffs could affect a broad range of countries, contradicting earlier suggestions that they would only apply to the top 10 or 15 trading partners with their own import duties on U.S. goods.
Meanwhile, Federal Reserve officials indicated a cautious approach on interest rates. Richmond Fed President Tom Barkin emphasized that the central bank would need confidence that inflation is on a downward trajectory before considering rate cuts. New York Fed President John Williams stated that monetary policy is well-positioned to navigate economic uncertainties, despite risks of higher inflation.
USD/INR Technical Outlook
The USD/INR pair continues to trade with a bearish bias, remaining below the key 100-day Exponential Moving Average (EMA) on the daily chart. The downward momentum is supported by a Relative Strength Index (RSI) reading below the midline, signaling continued pressure on the rupee. However, with the RSI in oversold territory, traders may anticipate temporary consolidation or a short-term recovery before any further depreciation of the INR.
Key support for USD/INR is found at the psychological level of 85.00. If the pair breaks below this level, it could extend its decline to 84.84 (the December 19 low) and 84.22 (the November 25 low). On the upside, resistance is expected between the 85.90-86.00 range, coinciding with the 100-day EMA. A sustained move above this level could push the pair towards 86.48 (the February 21 low) and potentially to 87.00.
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