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USD/INR falls back even as US-China trade deal looms large

  • The Indian Rupee recovers against US Dollar despite Trump reiterating 10% tariff threats on BRICS nations for de-dollarization practices.
  • Trump threatens to impose 200% tariffs on pharmaceutical imports next year.
  • Investors await the FOMC minutes for the June 17-18 policy meeting.

The Indian Rupee (INR) claws back early losses against the US Dollar (US) on Wednesday, pushing the USD/INR lower to near 85.78 during the European trading session. The pair rebounds even though the United States (US) President Donald Trump has reiterated threats to impose 10% tariffs on BRICS members for supporting anti-American policies.

On Tuesday, US President Trump stated while speaking to reporters that the BRICS nations will be charged an additional 10% tariffs for challenging the status of the US Dollar as the world’s reserve currency. "BRICS was set up to degenerate our [US] dollar and take it off as the standard," Trump said and added, "And that’s okay if they [BRICS] want to play that game, but I [Trump] can play that game too."

The development is unfavorable for the Indian currency at a time when India and the US are negotiating a trade pact in which the Asian giant vows to safeguard its agriculture and labor-intensive sectors from getting exposed to competition from US companies.

Another reason behind the increasing selling pressure on the Indian currency is the announcement from US President Trump at the White House cabinet meeting that he will impose 200% tariffs on pharmaceutical products. The headline is unfavorable for the Indian Rupee, given that India exports a chunk of its pharmaceutical output to the US.

"If they [companies from other nations] have to bring the pharmaceuticals into the country they’re going to be tariffed at a very, very high rate, like 200%. We’ll give them a certain period of time to get their act together," Trump said.

Indian Rupee PRICE Today

The table below shows the percentage change of Indian Rupee (INR) against listed major currencies today. Indian Rupee was the strongest against the Canadian Dollar.

USDEURGBPJPYCADAUDINRCHF
USD0.08%-0.07%-0.03%0.16%-0.08%-0.09%-0.12%
EUR-0.08%-0.14%-0.09%0.09%-0.12%-0.13%-0.08%
GBP0.07%0.14%0.08%0.23%-0.07%0.00%-0.04%
JPY0.03%0.09%-0.08%0.15%-0.06%-0.03%-0.10%
CAD-0.16%-0.09%-0.23%-0.15%-0.19%-0.21%-0.17%
AUD0.08%0.12%0.07%0.06%0.19%-0.03%0.04%
INR0.09%0.13%0.00%0.03%0.21%0.03%0.00%
CHF0.12%0.08%0.04%0.10%0.17%-0.04%-0.01%

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: USD/INR retreats ahead of FOMC minutes

  • USD/INR retreats during European trading hours on Wednesday even as the US Dollar trades firmly. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, is near its weekly high around 97.80. The US Dollar exhibits strength as US President Trump has signaled more healthy trade talks with China soon.
  • According to a report from Deccan Herald, US President Trump stated that he speaks often with Chinese leader XI Jinping and Beijing has been dealing fairly. “We're getting along with China’s President XI well. We speak often,” Trump said and added, “We have had a really good relationship with China lately and the nation has been very fair on our trade deal.” The scenario of improving trade relations between the US and China is favorable for the US Dollar and the entire globe as it reduces fears of Beijing dumping goods to other nations at lower rates.
  • On Tuesday, US President Trump also announced 50% tariffs on imports of copper, a move that will boost its production domestically. This has led to a sharp increase in copper prices.
  • Going forward, the major trigger for the US Dollar will be trade-related headlines by the White House. On Tuesday, Donald Trump said in a post on Truth.Social that he will unveil the current status of trade with a minimum of seven countries on Wednesday morning and more in the afternoon. However, he didn’t specify whether it would be a fresh tariff imposition on them or the signing of a trade agreement. According to comments from US Commerce Secretary Howard Lutnick in an interview with CNBC, Trump will reveal fresh tariff rates for them. “I expect 15-20 trade letters to go out over the next 2 days,” Lutnick said.
  • On the domestic front, investors await the release of the Federal Open Market Committee (FOMC) minutes for the June 17-18 policy meeting, which will be published at 18:00 GMT. The Fed kept interest rates steady in the range of 4.25%-4.50% for the fourth straight meeting.

Technical Analysis: USD/INR faces resistance above 86.00

The USD/INR pair ticks down after facing selling pressure above 86.00 on Wednesday, but stays inside Monday’s trading range. The pair tussles to stabilize above the 20-day Exponential Moving Average (EMA), which trades around 85.90. The near-term trend will turn bullish if the pair manages to do so.

The 14-day Relative Strength Index (RSI) rebounds to near 50.00. A fresh bullish momentum would emerge if the RSI breaks above 60.00.

Looking down, the May 27 low of 85.10 will act as key support for the major. On the upside, the June 24 low at 86.42 will be a critical hurdle for the pair.

 

Tariffs FAQs

Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.

Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.

There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.

During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.

Author

Sagar Dua

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.

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