USD/INR strengthens amid relentless FIIs selling in Indian stock market
|- The Indian Rupee falls further against the US Dollar due to robust USD demand by Indian importers.
- FIIs continue to pare their stake in the Indian equity market.
- US-EU disputes over Greenland’s future have weakened demand for US assets.
The Indian Rupee (INR) extends its losing streak for the fourth trading day against the US Dollar (USD) on Tuesday. The USD/INR pair strives to revisit its all-time high of 91.55, even as the US Dollar is broadly under pressure due to escalating disputes between the United States (US) and the Eurozone over Greenland’s future.
USD/INR continues to extend its advance due to sustained US Dollar demand by Indian importers. According to a report from Reuters, strong dollar demand by Indian importers has been a major driving force for the USD/INR pair.
The demand for US Dollars by Indian importers remains firm due to the absence of a trade deal announcement between the US and India. Negotiators from both nations have been expressing confidence that they are close to reaching a deal for over six months, but have not reached a consensus yet.
The US-India trade stalemate has remained a key dent in the interest of foreign investors toward the Indian stock market. Foreign Institutional Investors (FIIs) have been offloading their stake consistently for over six months. So far in January, FIIs have sold shares worth Rs. 29,315.22 crore.
The table below shows the percentage change of Indian Rupee (INR) against listed major currencies today. Indian Rupee was the weakest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | INR | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.18% | -0.05% | 0.19% | -0.06% | -0.23% | 0.12% | -0.18% | |
| EUR | 0.18% | 0.13% | 0.37% | 0.12% | -0.05% | 0.32% | 0.03% | |
| GBP | 0.05% | -0.13% | 0.26% | -0.01% | -0.18% | 0.17% | -0.13% | |
| JPY | -0.19% | -0.37% | -0.26% | -0.25% | -0.43% | -0.05% | -0.37% | |
| CAD | 0.06% | -0.12% | 0.00% | 0.25% | -0.18% | 0.22% | -0.11% | |
| AUD | 0.23% | 0.05% | 0.18% | 0.43% | 0.18% | 0.39% | 0.08% | |
| INR | -0.12% | -0.32% | -0.17% | 0.05% | -0.22% | -0.39% | -0.31% | |
| CHF | 0.18% | -0.03% | 0.13% | 0.37% | 0.11% | -0.08% | 0.31% |
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 Indian Rupee from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent INR (base)/USD (quote).
Daily Digest Market Movers: EU members condemn Trump's tariff threats
- The US Dollar continues to gain against a weakened Indian Rupee despite escalating US-EU disputes. At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.1% lower to near 98.90.
- The appeal of US assets has come under pressure as the dispute over Greenland’s future between both sides of the Atlantic has turned into a trade war.
- Over the weekend, US President Donald Trump levied 10% tariffs on several European Union (EU) members and the United Kingdom (UK), which will become effective from February 1, and warned that import duty could be increased to 25% if the continent continues to oppose Washington’s plans to purchase and control Greenland.
- In response, EU members and UK Prime Minister (PM) Keir Starmer have criticized US President Trump for invoking the tariff tool to coerce the continent to fulfill his intentions.
- Though the outcome of the US-EU tussle has resulted in the US Dollar’s weakness, and the Euro (EUR) has capitalized on the Greenback’s alternative demand, the scenario is unlikely to continue as the size of Europe’s exports to the US is higher than what it imports from the nation, analysts at Societe Generale said.
- On the domestic front, traders remain confident that the Federal Reserve (Fed) will not cut interest rates in the policy meeting later this month.
- Meanwhile, Fed Vice Chair for Supervision Michelle Bowman stated in a speech on Friday that the central bank needs to bring interest rates to their neutral level sooner to contain elevated job risks.
Technical Analysis: USD/INR approaches all-time high at 91.55
In the daily chart, USD/INR trades at 91.2570. The 20-Exponential Moving Average (EMA) slopes higher and lies below the price at 90.4727, underpinning the advance.
The 14-day Relative Strength Index (RSI) at 67.67 signals firm bullish momentum, nearing the overbought threshold.
Trend extension would follow as long as the spot remains above the 20-EMA, with dips expected to find support in the 90.4727–90.3268 band. A move into overbought on RSI would validate continuation, while a retreat from the current reading could shift the pair into consolidation.
(The technical analysis of this story was written with the help of an AI tool.)
Indian economy FAQs
The Indian economy has averaged a growth rate of 6.13% between 2006 and 2023, which makes it one of the fastest growing in the world. India’s high growth has attracted a lot of foreign investment. This includes Foreign Direct Investment (FDI) into physical projects and Foreign Indirect Investment (FII) by foreign funds into Indian financial markets. The greater the level of investment, the higher the demand for the Rupee (INR). Fluctuations in Dollar-demand from Indian importers also impact INR.
India has to import a great deal of its Oil and gasoline so the price of Oil can have a direct impact on the Rupee. Oil is mostly traded in US Dollars (USD) on international markets so if the price of Oil rises, aggregate demand for USD increases and Indian importers have to sell more Rupees to meet that demand, which is depreciative for the Rupee.
Inflation has a complex effect on the Rupee. Ultimately it indicates an increase in money supply which reduces the Rupee’s overall value. Yet if it rises above the Reserve Bank of India’s (RBI) 4% target, the RBI will raise interest rates to bring it down by reducing credit. Higher interest rates, especially real rates (the difference between interest rates and inflation) strengthen the Rupee. They make India a more profitable place for international investors to park their money. A fall in inflation can be supportive of the Rupee. At the same time lower interest rates can have a depreciatory effect on the Rupee.
India has run a trade deficit for most of its recent history, indicating its imports outweigh its exports. Since the majority of international trade takes place in US Dollars, there are times – due to seasonal demand or order glut – where the high volume of imports leads to significant US Dollar- demand. During these periods the Rupee can weaken as it is heavily sold to meet the demand for Dollars. When markets experience increased volatility, the demand for US Dollars can also shoot up with a similarly negative effect on the Rupee.
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