Indian Rupee declines amid hawkish Fed bets, RBI pushes back rate hike fears
- The Indian Rupee slides further against the US Dollar amid hawkish Fed bets.
- Lower oil prices are expected to limit the Indian Rupee’s downside.
- Investors await the US PCE Inflation data, which will be released on Thursday.
The Indian Rupee (INR) trades lower against the US Dollar (USD) on Wednesday, with the USD/INR pair rising to near 94.85. The pair gains as the US Dollar posts a fresh annual high amid firm expectations that the Federal Reserve (Fed) will deliver at least two interest rate hikes this year.
At press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.15% higher to near 101.55.
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 Euro.
| USD | EUR | GBP | JPY | CAD | AUD | INR | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.23% | 0.12% | 0.08% | 0.09% | 0.18% | -0.36% | 0.23% | |
| EUR | -0.23% | -0.11% | -0.17% | -0.14% | -0.05% | -0.31% | 0.00% | |
| GBP | -0.12% | 0.11% | -0.04% | -0.06% | 0.06% | -0.47% | 0.10% | |
| JPY | -0.08% | 0.17% | 0.04% | 0.00% | 0.09% | -0.16% | 0.13% | |
| CAD | -0.09% | 0.14% | 0.06% | -0.01% | 0.09% | -0.17% | 0.15% | |
| AUD | -0.18% | 0.05% | -0.06% | -0.09% | -0.09% | -0.26% | 0.02% | |
| INR | 0.36% | 0.31% | 0.47% | 0.16% | 0.17% | 0.26% | 0.31% | |
| CHF | -0.23% | -0.00% | -0.10% | -0.13% | -0.15% | -0.02% | -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 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).
Hawkish Fed bets strengthen US Dollar
According to the CME FedWatch tool, the odds of the Fed hiking interest rates this year are almost 86%. While the possibility of at least two interest rate hikes is 48.3%. This is a sharp turnaround from two interest rate cuts projected before the onset of the Middle East war, which led to a significant increase in inflationary pressures.
The latest United States (US) Consumer Price Index (CPI) report showed that the core inflation – which excludes volatile food and energy items – accelerated to 2.9% in May, the highest level seen in seven months.
For more cues on the current status of inflation, investors await the US Personal Consumption Expenditure Price Index (PCE) data for May, which will be released on Thursday. The US core PCE inflation data, which is the Fed’s preferred inflation gauge, is expected to arrive at 3.4% Year-on-Year (YoY), higher than the previous reading of 3.3%.
Lower oil prices to limit Indian Rupee’s downside
Oil prices extend their decline on hopes that traffic through the Strait of Hormuz, a vital passage to almost 20% of global energy supply, has started normalizing amid continued progress in technical talks between the US and Iran.
According to a Bloomberg report, more ships are openly signaling their intention to traverse the Strait of Hormuz, pointing to growing confidence among shipowners and traders about sending vessels through the chokepoint as tensions ease.
In the opening session, the MCX Crude Oil contract expiring on July 20 is down 0.7% to near 6,900, the lowest level seen in three months.
Lower oil prices bode well for currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs.
Indian stock markets struggle to lure foreign investors
Despite the signing of the US-Iran Memorandum of Understanding (MoU) and continued progress in nuclear talks, the Indian stock market appears to be failing to get a positive response from Foreign Institutional Investors (FIIs). Overseas investors seem less enthusiastic towards the Indian equity market, investing on an irregular basis.
On Tuesday, FIIs turned out to be net buyers, but increased their stake merely by Rs. 17.86 crore. The amount was significantly lower than the selling of Rs. 635.91 crore worth of their stake on Monday.
RBI's Malhotra rules out interest rate hike fears
Reserve Bank of India's (RBI) Governor Sanjay Malhotra pushes back fears of interest rate hikes in the near term, while speaking to ET Now. Malhotra said that it is "premature" to discuss interest rate hikes, citing that the central bank doesn't shift its stance due to elevated uncertainty.
Technical Analysis: USD/INR struggles to return above 20-day EMA
USD/INR trades higher at around 94.85, extending a corrective phase below a key band of moving-average and trendline resistance. The 20-day exponential moving average (EMA) at 94.9877 now caps the pair at the margin, while the broader downward-sloping resistance line traced from 97.1183, with an intermediate reference at the prior break area around 95.2926, reinforces a bearish near-term bias.
The Relative Strength Index (RSI) at 47.84 hovers just below the neutral 50 line, hinting that downside pressure persists but without clear oversold conditions.
On the topside, immediate resistance is located at the 20-day EMA near 95.00, followed by the former break zone around 95.29, where sellers are likely to re-emerge if a bounce develops, before the more distant trendline origin at 97.12. Looking down, the May 7 low at 94.03 is the key support zone; a downside move below the same would expose it to the April 15 high at 93.46.
(The technical analysis of this story was written with the help of an AI tool.)
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
