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USD/INR remains subdued due to improved market optimism

  • USD/INR declined as the US Dollar struggled on easing safe-haven demand amid signs of Middle East de-escalation.
  • India HSBC Services PMI rose to 58.8 in April from 57.9 flash, rebounding after March’s 13-month low of 57.5.
  • 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 95.10 during the Asian hours on Wednesday. However, the Indian Rupee (INR) pares its daily gains following the release of HSBC Purchasing Managers' Index (PMI) data. India Services PMI was revised upward to 58.8 in April from the preliminary estimate of 57.9, following March’s 13-month low of 57.5. The latest reading signaled the strongest expansion since last November, driven by a quicker increase in new orders and output.

India’s HSBC Composite PMI came in at 58.2 in April, slightly below the flash estimate of 58.3 but higher than 57.0 in the previous month, indicating continued and historically strong growth in private sector activity. Expansion remained broad-based, with both manufacturing output and services activity advancing at solid rates.

The USD/INR pair weakened as the US Dollar (USD) declined 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 US Secretary of State 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. US President 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 fresh record highs

USD/INR trades around 95.10 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.

(The story was corrected on May 6 at 09.03 GMT, adding the job positions of US Secretary of State Marco Rubio and US President Donald Trump in the third and fourth paragraphs, respectively.)

USD/INR: Daily Chart

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.

USDEURGBPJPYCADAUDNZDINR
USD-0.20%-0.18%-0.06%-0.14%-0.69%-0.77%0.00%
EUR0.20%0.02%0.15%0.08%-0.47%-0.57%0.11%
GBP0.18%-0.02%0.13%0.06%-0.50%-0.59%0.17%
JPY0.06%-0.15%-0.13%-0.08%-0.64%-0.71%-0.03%
CAD0.14%-0.08%-0.06%0.08%-0.55%-0.63%0.05%
AUD0.69%0.47%0.50%0.64%0.55%-0.07%0.58%
NZD0.77%0.57%0.59%0.71%0.63%0.07%0.74%
INR0.00%-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).

Risk sentiment FAQs

In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.

Author

Akhtar Faruqui

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

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