Indian Rupee advances on improved market sentiment
- USD/INR weakens as the US Dollar declines amid easing safe-haven demand amid signs of Middle East de-escalation.
- Washington ended offensive operations against Iran, reaffirming the ceasefire, as Marco Rubio said objectives were achieved.
- India’s forex reserves fell from $728.5 billion, while equity outflows hit $19 billion in March and April.
USD/INR extends losses for the second successive day, trading around 95.00 during the Asian hours on Wednesday. Traders will likely observe India’s HSBC Composite and Services Purchasing Managers' Index (PMI) data to be released later in the day.
The USD/INR pair weakens as the US Dollar (USD) declines on reduced safe-haven demand, driven by signs of de-escalation in Middle East tensions. Washington declared an end to offensive operations against Iran and reaffirmed the ceasefire, with Marco Rubio stating that “Operation Epic Fury is concluded,” adding that its objectives had been achieved.
The Indian Rupee (INR) faces fewer headwinds due to softer oil prices. West Texas Intermediate continues to decline, trading near $97.90 per barrel at the time of writing. Crude oil prices are easing amid fading tensions in the Middle East. Donald Trump said that the US military would temporarily pause “Project Freedom” to restore freedom of navigation for commercial shipping through the Strait of Hormuz. Trump added that the decision was made at the request of Pakistan and other countries and follows what he described as “tremendous military success” during a US campaign against Iran.
Indian equities opened higher on Wednesday, supported by the decline in oil prices after Trump signaled that a potential peace agreement with Iran could be within reach. Foreign portfolio investors (FPI) sold domestic equities worth 36.22 billion rupees ($380.54 million) on a net basis on Tuesday, while domestic institutional investors (DII) purchased equities worth 26.03 billion rupees, per Reuters.
Technical Analysis: USD/INR trades near 95.00 after pulling back from record highs
USD/INR trades around 95.00 at the time of writing on Wednesday. The technical analysis of the daily chart indicates an ongoing bullish bias as the pair is remaining within the ascending channel pattern.
USD/INR keeps a bullish near-term bias as it holds above both the nine-period and 50-period Exponential Moving Averages (EMAs). The alignment of price over these trend measures suggests underlying demand remains in control, while the 14-day Relative Strength Index (RSI) around 62 stays in positive but not overbought territory, hinting that upside momentum is still constructive though no longer in an extreme state.
The USD/INR pair may rebound toward the fresh record high of 95.53, which was recorded on May 5. On the downside, the initial support lies at the nine-day EMA of 94.72, aligned with the lower boundary of the channel.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Indian Rupee.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | INR | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.20% | -0.18% | -0.06% | -0.14% | -0.69% | -0.77% | 0.00% | |
| EUR | 0.20% | 0.02% | 0.15% | 0.08% | -0.47% | -0.57% | 0.11% | |
| GBP | 0.18% | -0.02% | 0.13% | 0.06% | -0.50% | -0.59% | 0.17% | |
| JPY | 0.06% | -0.15% | -0.13% | -0.08% | -0.64% | -0.71% | -0.03% | |
| CAD | 0.14% | -0.08% | -0.06% | 0.08% | -0.55% | -0.63% | 0.05% | |
| AUD | 0.69% | 0.47% | 0.50% | 0.64% | 0.55% | -0.07% | 0.58% | |
| NZD | 0.77% | 0.57% | 0.59% | 0.71% | 0.63% | 0.07% | 0.74% | |
| INR | 0.00% | -0.11% | -0.17% | 0.03% | -0.05% | -0.58% | -0.74% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
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.
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