USD/INR rallies as delay in US-India deal pushes Rupee on backfoot
- The Indian Rupee declines against the US Dollar as the former weakens due to multiple headwinds.
- Consistent outflow of foreign funds from Indian markets and a delay in the US-India deal have weighed on the Indian Rupee.
- The Fed is almost certain to leave interest rates steady in the monetary policy meeting next week.
The Indian Rupee (INR) extends its losing streak for the fourth trading day against the US Dollar (USD) on Tuesday. The USD/INR pair jumps to near 86.50, the highest level seen in almost a month. The pair demonstrates strength as hopes of a trade deal between the United States (US) and India before the August 1 tariff deadline have faded.
A report from NDTV showed on Monday that India’s Chief Trade Negotiator Rajesh Agrawal-led team has returned from Washington after the fifth round of trade talks, with the deal remaining in a cliffhanger. The report stated that an interim Free Trade Agreement (FTA) would be signed in the last quarter of the year, suggesting that exports from India to the US will continue to face sectoral tariffs. The report also showed that a team of officials from Washington will visit Indian in mid-August to extend trade discussions.
Another reason behind weakness in the Indian currency is the continuous outflow of funds by Foreign Institutional Investors (FIIs) this month. So far, FIIs have sold Rs. 18,636.98 crores worth of equities in July. Ambiguity over the global outlook after the August 1 tariff deadline and moderate growth in quarterly earnings shown by India Inc. have forced FIIs to pare investments from Indian markets.
During the last trading hour on Tuesday, Nifty50 demonstrates subduedness above 25,000. Weak results from oil-to-telecom giant Reliance and moderate growth in private sector banks have weighed on Indian bourses. Meanwhile, food delivery and quick commerce (QC) platform provider Zomato has surged over 10% on the back of robust revenue growth. However, the profit growth has declined further as its QC business continues to expand dark stores to gain market share.
Indian Rupee PRICE Today
The table below shows the percentage change of Indian Rupee (INR) against listed major currencies today. Indian Rupee was the weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | INR | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.07% | 0.16% | 0.33% | 0.06% | 0.17% | 0.07% | 0.11% | |
| EUR | -0.07% | 0.11% | 0.26% | 0.01% | 0.09% | 0.02% | 0.06% | |
| GBP | -0.16% | -0.11% | 0.16% | -0.09% | -0.02% | -0.09% | -0.05% | |
| JPY | -0.33% | -0.26% | -0.16% | -0.24% | -0.17% | -0.24% | -0.28% | |
| CAD | -0.06% | -0.01% | 0.09% | 0.24% | 0.08% | 0.03% | 0.06% | |
| AUD | -0.17% | -0.09% | 0.02% | 0.17% | -0.08% | -0.11% | -0.08% | |
| INR | -0.07% | -0.02% | 0.09% | 0.24% | -0.03% | 0.11% | 0.06% | |
| CHF | -0.11% | -0.06% | 0.05% | 0.28% | -0.06% | 0.08% | -0.06% |
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: Indian Rupee slumps against US Dollar
- The Indian Rupee declines against the US Dollar, while the latter trades broadly flat in Tuesday’s Asian session after correcting the previous day. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades flat slightly below 98.00, after retracing from the four-week high near 99.00.
- The US Dollar is expected to stay on the sidelines with investors awaiting headlines related to trade discussions by the US with its trading partners.
- So far, the US has announced trade deals with the United Kingdom (UK), Vietnam, and Indonesia, and a limited pact with China. Washington has announced tariffs on 22 nations, notably Japan, Vietnam, Canada, Mexico, and the European Union (EU).
- Meanwhile, trade tensions between the US and the EU have escalated as the 27-nation bloc vowed to retaliate after President Donald Trump demanded a higher baseline tariff and showed reluctance to the bloc's demand to waive the 25% automobile levy.
- The comments from US Treasury Secretary Scott Bessent in an interview with CNBC on Monday have signaled that there won’t be many deals signed ahead of the August 1 tariff deadline, as Washington is more concerned about the “quality of deal” not timing. “The important thing here is the quality of the deal, not the timing of the deals,” Bessent said.
- Bessent’s comments also signaled that August 1 is “hard deadline” and Washington could roll back “April 2 level” tariff rates on nations that have failed to reach a deal.
- On the domestic front, traders are increasingly confident that the Federal Reserve (Fed) will keep interest rates steady in the range of 4.25%-4.50% in the policy meeting next week. According to the CME FedWatch tool, the probability for the Fed to reduce borrowing rates in the September policy meeting has also reduced to 58.3% from 69.6% seen a month ago. Traders pare Fed dovish bets after the latest Consumer Price Index (CPI) report showed that prices of products that are the largest imports in the US have increased.
- This week, investors will focus on the preliminary private Purchasing Managers’ Index (PMI) data for July from both India and the US, which will be published on Thursday.
Technical Analysis: USD/INR advances to near 86.50
USD/INR trades higher around 86.50 on Tuesday. The near-term trend of the pair remains bullish as the 20-day Exponential Moving Average (EMA) slopes higher around 86.07.
The 14-day Relative Strength Index (RSI) jumps to near 60.00. A fresh bullish momentum would emerge if the RSI breaks above that level.
Looking down, the 50-day EMA near 85.85 will act as key support for the major. On the upside, the June 23 high near 87.00 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
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.
