USD/INR soars despite US-India trade deal optimism
- The Indian Rupee tumbles to near 88.47 against the US Dollar, even as the US Dollar trades calmly.
- The US and India have agreed on almost all issues and could announce a trade deal soon.
- Cooling US inflation growth boosts speculation for more Fed interest rate cuts.
The Indian Rupee (INR) slumps against the US Dollar (USD) at the start of the week. The USD/INR pair jumps to near 88.47 even as hopes of a trade deal between the United States (US) and India have increased.
A Bloomberg report on Friday showed that an Indian government official said that negotiators from both nations have resolved almost all issues and are in the final stage of discussing the legal language of the trade pact. “There has been convergence on most issues, and a deal is in sight,” the official said on condition of anonymity.
Meanwhile, Indian Commerce and Industry Minister Piyush Goyal stated in an event in Germany on Friday that New Delhi won’t deal in a rush. “We don’t do deals in a hurry, and we don’t do deals with deadlines, with a gun on our head,” Goyal said.
Trade relations between the US and India have been under stress for a few months since President Donald Trump raised tariffs on imports from New Delhi to 50%, criticizing India for buying Oil from Russia.
Meanwhile, signs of a slowdown in the outflow of foreign funds from the Indian stock market could support the Indian Rupee going forward. So far this month, Foreign Institutional Investors (FIIs) have sold shares worth Rs. 244.02 crores, against an average selling of Rs. 43,290.32 crores seen in the last three months.
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 | 0.07% | -0.02% | 0.06% | -0.14% | -0.38% | 0.47% | 0.12% | |
| EUR | -0.07% | -0.05% | 0.00% | -0.19% | -0.41% | 0.40% | 0.10% | |
| GBP | 0.02% | 0.05% | 0.08% | -0.13% | -0.34% | 0.48% | 0.15% | |
| JPY | -0.06% | 0.00% | -0.08% | -0.21% | -0.47% | 0.40% | 0.06% | |
| CAD | 0.14% | 0.19% | 0.13% | 0.21% | -0.24% | 0.59% | 0.29% | |
| AUD | 0.38% | 0.41% | 0.34% | 0.47% | 0.24% | 0.82% | 0.53% | |
| INR | -0.47% | -0.40% | -0.48% | -0.40% | -0.59% | -0.82% | -0.29% | |
| CHF | -0.12% | -0.10% | -0.15% | -0.06% | -0.29% | -0.53% | 0.29% |
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: US Dollar drops amid moderate US CPI growth
- The Indian Rupee struggles to outperform the US Dollar even as the latter faces pressure due to softer-than-expected US Consumer Price Index (CPI) data for September, released on Friday.
- During the Asian session, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.1% lower to near 98.80.
- The US CPI report showed that the headline and the core inflation – which excludes volatile food and energy items – rose at a moderate pace of 0.3% and 0.2% on a monthly basis. On year, the headline CPI grew by 3%, slower than estimates of 3.1% but faster than the prior reading of 2.9%. In the same period, the core CPI decelerated to 3% from expectations and the previous release of 3.1%.
- Soft US inflation data has given room to the Federal Reserve (Fed) to focus more on supporting slower job growth. Meanwhile, traders are increasingly confident that the Fed will cut interest rates by 25 basis points (bps) in the monetary policy announcement on Wednesday, according to the CME FedWatch tool.
- Meanwhile, easing US-China trade frictions fails to offer any relief to the US Dollar. Earlier in the day, US President Donald Trump told reporters on Air Force One en route to Japan from Malaysia that Washington and Beijing could reach a deal after his meeting with Chinese leader Xi Jinping later this month in South Korea, Reuters reported. "I've got a lot of respect for President Xi and I think we're going to come away with a deal," Trump said.
- US Treasury Secretary Scott Bessent also expressed confidence that 100% additional tariff threats by Washington on Beijing and rare earth export controls by them would be deferred, after meeting with Chinese Premier He Lifeng at the sidelines of the Association of Southeast Asian Nations (ASEAN) summit in Malaysia over the weekend.
- “No, I’m not, and I’m also anticipating that we will get some kind of a deferral on the rare earth export controls that the Chinese had discussed,” Bessent said in an interview with NBC’s "Meet the Press" program after he was asked whether the White House would proceed with 100% additional tariffs on China.
Technical Analysis: USD/INR reclaims 20-day EMA
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The USD/INR pair rises to near 88.40 at the start of the week. The pair has recovered to near the 20-day Exponential Moving Average (EMA), which trades around 88.40.
The 14-day Relative Strength Index (RSI) recovers from 40.00, suggesting strong demand at lower levels.
Looking down, the August 21 low of 87.07 will act as key support for the pair. On the upside, the September 23 low around 88.48 will be a key barrier.
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
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.
