- The Indian Rupee moves higher against the US Dollar at open.
- US President Trump raised tariffs on imports from India to 50%.
- The US Dollar weakened as Fed officials argued in favor of interest rate cuts this year.
The Indian Rupee (INR) opens higher against the US Dollar (USD) for the third straight trading day on Thursday. The USD/INR pair falls to near 87.60 at open as a neutral guidance on the monetary policy outlook by the Reserve Bank of India (RBI) provides support to the Indian currency against escalating trade tensions between India and the United States (US).
On Wednesday, US President Donald Trump increased the duty on imports from India to 50%, a move that was already anticipated by investors as he announced on Tuesday that he will raise tariffs further on New Delhi for buying Oil from Russia.
India has not been a good trading partner, because they do a lot of business with us, but we don’t do business with them. So, we settled on 25% (tariff), but I think I’m going to raise that very substantially over the next 24 hours, because they’re buying Russian oil. They’re fuelling the war machine. And if they’re going to do that, then I’m not going to be happy,” Trump said in an interview with CNBC Squawk Box on Tuesday.
In response, New Delhi stated that it had already made clear its stance on Oil imports from Russia, reiterating that the tariff is "unfair, unjustified and unreasonable", BBC News reported. New Delhi also cited the event of the US imposing additional tariffs on India as “extremely unfortunate,” as its actions are in favor of its own national interest.
Daily digest market movers: Indian Rupee gains against US Dollar
- The downside move in the USD/INR pair is also driven by weakness in the US Dollar. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, holds onto Wednesday’s losses around 98.20 during the Asian trading session on Thursday.
- The US Dollar faced selling pressure on Wednesday as a slew of Federal Reserve (Fed) officials, such as Minneapolis Fed President Neel Kashkari, San Francisco Fed President Mary Daly, and Fed Governor Lisa Cook, cited concerns over labor market conditions and argued in favor of reducing interest rates.
- “The economy is slowing and the Fed needs to respond to the slowing economy,” Kashkari said in an interview with CNBC. Kashkari added, “It may still be relevant in the near term to begin adjusting the policy rate, and two rate cuts this year still seem appropriate.” When asked about whether interest rate cuts are appropriate at a time when the impact of tariffs has started flowing into the economy, Kashkari said, “If inflation does rise because of tariffs, the Fed could pause or even hike, meanwhile, the data on slowing is clear.”
- Separately, Mary Daly also stated that the Fed would need to observe for six months or more to gauge the scope of tariff-driven inflation in the economy, but growing labor market concerns are making her uncomfortable in supporting a steady monetary policy stance in upcoming meetings.
- According to the CME FedWatch tool, the Fed is almost certain to cut borrowing rates by 25 basis points (bps) to 4.00%-4.25%.
- Meanwhile, tariff fears have renewed as US President Trump said on Wednesday that Washington will impose 100% tariffs on imports of semiconductor chips.
- In India, the RBI held its key Repo Rate steady at 5.5%, as expected, and maintained a neutral guidance on the interest rate outlook. Economists anticipated that the RBI would choose a dovish stance on the monetary policy going forward amid trade tensions between the US and India, and easing inflationary pressures. The RBI also slashed its Consumer Price Index (CPI) projections for the Financial Year (FY) 2026 to 3.1% from 3.7% projected earlier.
Technical Analysis: USD/INR extends losing streak
The USD/INR pair extends its losing streak for the third trading day on Thursday. The pair started correcting after revisiting an all-time high around 88.25 on Tuesday. However, the near-term trend of the pair remains bullish as the 20-day Exponential Moving Average (EMA) slopes higher around 87.08.
The 14-day Relative Strength Index (RSI) oscillates inside the 60.00-80.00 range, suggesting a strong bullish momentum
Looking down, the 20-day EMA will act as key support for the major. On the upside, Tuesday’s high around 88.25 will be a critical hurdle for the pair.
Indian Rupee FAQs
The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.
The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.
Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.
Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.
作者：Sagar Dua，文章来源FXStreet_id，版权归原作者所有，如有侵权请联系本人删除。
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