USD/INR loses ground as India’s GDP exceeds expectations, US Dollar declines

Indian Rupee recovers in Monday’s early European session.
Stronger GDP data from India supports the INR, but higher oil prices and RBI rate cut bets might cap its upside.
Traders await the US May ISM Manufacturing PMI data later on Monday ahead of the RBI rate decision.

Lallalit Srijandorn FXStreet

The Indian Rupee (INR) rebounds on Monday, snapping the four-day losing streak. The upbeat India’s Q1 Gross Domestic Product (GDP) report boosts equities and lifts the local currency both via portfolio inflows and sentiment.

Nonetheless, a rise in crude oil prices might drag the Indian currency lower. It’s worth noting that India is the world's third-largest oil consumer, and higher crude oil prices tend to have a negative impact on the INR value. Additionally, the rising expectation that the Reserve Bank of India (RBI) will deliver a third straight 25 basis points (bps) rate cut to boost growth might cap the INR’s upside in the near term.

Looking ahead, traders will keep an eye on the US May ISM Manufacturing Purchasing Managers' Index (PMI) report, which is due later on Monday. On Friday, the RBI interest rate decision and the US Nonfarm Payrolls (NFP) data will be in the spotlight.

Traders will also closely monitor a trade negotiation between the United States (US) and India, which is officially expected to conclude by fall. US President Donald Trump slapped tariffs of up to 27% on Indian goods on April 2 and a 90-day tariff pause on these ends on July 9.

Indian Rupee strengthens on upbeat India’s GDP report

India's economy grew by 7.4% YoY in the first quarter of 2025, up from 6.2% the previous quarter and significantly beating analyst expectations of 6.7%.
India remains the world's fastest-growing major economy, though growth has sharply declined from the 9.2% high recorded in the financial year 2023-24.
Net Foreign Direct Investment (FDI) into India declined to $0.35 billion in 2024-25, the lowest level in two decades, as rising outbound foreign investment and repatriation by Indian enterprises offset the inbound investment.
The Indian rupee is emerging as Asia’s worst performer this quarter and may continue to lag peers as the RBI aims to avert a depletion in its foreign exchange reserves, according to analysts.
India’s foreign exchange reserves stood at about $693 billion as of May 23, down from the all-time high of $705 billion reached in September last year.
The US Personal Consumption Expenditures (PCE) Price Index rose 2.1% year on year in April, compared to 2.3% in March, the US Bureau of Economic Analysis showed on Friday. This figure came in below the market consensus of 2.2%.

USD/INR keeps the bearish tone in the longer term

The Indian Rupee trades in positive territory on the day. The USD/INR pair remains capped below the key 100-day Exponential Moving Average (EMA) on the daily timeframe, indicating that the path of least resistance is to the downside. In the near term, further consolidation cannot be ruled out, with the 14-day Relative Strength Index (RSI) hovering around the midline.

USD/INR seems to be finding initial support at 84.78, the low of May 26. A break below the mentioned level could set off a drop toward 84.61, the low of May 12. The next bearish target to watch is 84.00, the psychological level and the lower limit of the trend channel.

On the other hand, the key resistance level for the pair emerges in the 85.55-85.65 zone, representing the 100-day EMA and the upper boundary of the trend channel. Any follow-through buying could see a rally to 86.10, the high of May 22.

RBI FAQs

What is the role of the Reserve Bank of India?

The role of the Reserve Bank of India (RBI), in its own words, is "..to maintain price stability while keeping in mind the objective of growth.” This involves maintaining the inflation rate at a stable 4% level primarily using the tool of interest rates. The RBI also maintains the exchange rate at a level that will not cause excess volatility and problems for exporters and importers, since India’s economy is heavily reliant on foreign trade, especially Oil.

How do the decisions of the Reserve Bank of India affect the Rupee?

The RBI formally meets at six bi-monthly meetings a year to discuss its monetary policy and, if necessary, adjust interest rates. When inflation is too high (above its 4% target), the RBI will normally raise interest rates to deter borrowing and spending, which can support the Rupee (INR). If inflation falls too far below target, the RBI might cut rates to encourage more lending, which can be negative for INR.

Does the Reserve Bank of India directly intervene in FX markets?

Due to the importance of trade to the economy, the Reserve Bank of India (RBI) actively intervenes in FX markets to maintain the exchange rate within a limited range. It does this to ensure Indian importers and exporters are not exposed to unnecessary currency risk during periods of FX volatility. The RBI buys and sells Rupees in the spot market at key levels, and uses derivatives to hedge its positions.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

AUD/USD hangs near three-week low, below 0.6950 as traders await US NFP report

AUD/USD hits a three-week low during the Asian session on Friday as the RBA’s dovish shift and a rout in equity markets weigh on the risk-sensitive Aussie. However, the recent slump in US bond yields to a two-month low keeps US Dollar bulls on the back foot and limits losses for the currency pair as traders look to the US NFP report for a fresh impetus.

USD/JPY bounces off three-week low; keeps the red near 157.65 as focus remains on US NFP

USD/JPY bounces off the weekly low set during the Asian session, as bears turn cautious ahead of the US NFP report due later this Friday. The upside seems limited as the recent slump in US bond yields and hopes of Iran war de-escalation undermine the US Dollar. Moreover, a hawkish BoJ and intervention risks support the Japanese Yen, capping the pair.

Gold weakens further below $4,050; looks to US NFP for fresh impetus

Gold extends the previous day's retracement slide from a two-week high, weakening further below $4,050 during Friday’s Asian session amid modest US Dollar strength. The USD Index builds on its recovery from the lowest level since late September, and is seen weighing on the commodity. The downside, however, seems limited as traders await the release of the closely watched US monthly employment details before placing aggressive directional bets.

Zcash defies crypto market sell-off as NU7 upgrade fuels breakout hopes

Zcash (ZEC) shows resilience above $1,300 on Friday, defying the broader cryptocurrency market sell-off, which saw over $1 billion in liquidations the previous day. This strength aligns with Network Upgrade 7 (NU7), scheduled for Friday, which enables faster payments and disables older transaction pools.

Neither the election nor the US Dollar: Why Friday's payrolls hold the key to Gold's next move

Gold has climbed back above $4,000 as the US Dollar weakened following a Democratic sweep in the US midterm elections. However, with every Gold rally facing heavy selling throughout the year, investors are looking to Friday's Nonfarm Payrolls report to determine whether this move marks a sustainable breakout or just another temporary rebound.

US Dollar breaks below 101.50 as Democrats sweep Congress

The US Dollar (USD) comes under heavy selling pressure on Wednesday, with the US Dollar Index (DXY) falling around 0.5% to trade near 101.35 after sliding below the 101.50 level. The Greenback retreats to its lowest level in four weeks as investors reassess the political and economic outlook following the Democratic Party's sweeping victory in the United States (US) midterm elections.