USD/INR strengthens as global trade woes weigh on Indian Rupee
- The Indian Rupee slumps against the US Dollar as the former faces multiple headwinds.
- Subdued India Inc. Q1 earnings growth, FIIs’ selling, and US-India trade deal uncertainty have weighed on the Indian Rupee.
- The US Dollar trades calmly while traders pare Fed dovish bets.
The Indian Rupee (INR) starts the week on a negative note against the US Dollar (USD). The USD/INR posts a fresh four-week high to near 86.50 as the Indian Rupee underperforms due to multiple headwinds such as: no confirmation of a trade agreement between the United States (US) and India, President Donald Trump reiterating threat of tariffs on BRICS, subdued start of Q1FY26 earnings season, and significant selling by Foreign Institutional Investors (FIIs) so far this month.
On several occasions, US President Trump has stated that Washington is close to finalizing a trade deal with India. Last week, India’s Chief Trade Negotiator Rajesh Agrawal-led team also fled Washington for the next round of trade talks. The delay in trade confirmation by both economies has prompted anxiety among investors.
Meanwhile, Trump has threatened to impose 10% tariffs on imports from BRICS nations for supporting what he called “anti-American” policies again on Friday. Trump emphasized the need to “preserve the US Dollar’s reserve status” and warned that Washington could not allow anyone to “play games with us”, Reuters reported.
On the domestic front, signs of a slowdown in early Q1 results trend have weighed on Indian bourses. So far, quarterly results from major companies have been sluggish Net Interest Margins (NIMs) and moderate profit growth. Oil-to-telecom conglomerate Reliance has posted stellar earnings this quarter, but these were escalated by a one-off increase. The share is down over 2% in Monday's session. On the contray, outperforming banking stocks have led Nifty50 80 points higher to near 25,050.
A moderate revenue growth posted by India Inc. so far appears to have led Foreign Portfolio Investors (FPIs) to sell significant holdings in July. FIIs bought RS. 374.4 crores worth of shares on Friday, but have sold Rs. 16,955.75 crores worth of shares cumulatively.
Daily digest market movers: Indian Rupee declines against US Dollar, trades pare Fed dovish bets
- The Indian Rupee trades lower against the US Dollar during the European session on Monday. The USD trades broadly stable, following a decline in traders’ bets supporting interest rate cuts by the Federal Reserve (Fed) in the monetary policy meeting in September.
- At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades calmly around 98.50, close to a four-week high of around 99.00.
- According to the CME FedWatch tool, the probability for the Fed to reduce interest rates in the September meeting has declined to 58.5% from almost 70% seen a month ago. Traders pare Fed dovish bets after the release of the United States (US) Consumer Price Index (CPI) data for June, which showed that prices of products that are largely imported have increased after the imposition of sectoral tariffs by President Donald Trump.
- Market experts have warned that inflationary pressures could accelerate further as Trump’s so-called “reciprocal tariffs” are yet to be filtered into the economy, which will become effective from August 1.
- Chicago Federal Reserve Bank President Austan Goolsbee has guided that the central bank would need to do more to assess the need for any adjustment in the current monetary policy stance, as a constant "drip-drip-" of new tariff announcements undercuts the idea that tariffs have only a “one-time impact” on prices, Reuters reported.
- This week, the Indian Rupee and the US Dollar will be influenced by the preliminary private Composite Purchasing Managers’ Index (PMI) data for July, which will be released on Thursday.
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 British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | INR | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.06% | -0.20% | -0.06% | 0.09% | 0.08% | 0.15% | -0.07% | |
| EUR | 0.06% | -0.06% | 0.02% | 0.13% | 0.10% | 0.23% | -0.05% | |
| GBP | 0.20% | 0.06% | -0.10% | 0.24% | 0.20% | 0.37% | 0.21% | |
| JPY | 0.06% | -0.02% | 0.10% | 0.14% | 0.16% | 0.15% | 0.15% | |
| CAD | -0.09% | -0.13% | -0.24% | -0.14% | 0.05% | 0.13% | -0.20% | |
| AUD | -0.08% | -0.10% | -0.20% | -0.16% | -0.05% | 0.10% | -0.01% | |
| INR | -0.15% | -0.23% | -0.37% | -0.15% | -0.13% | -0.10% | -0.18% | |
| CHF | 0.07% | 0.05% | -0.21% | -0.15% | 0.20% | 0.01% | 0.18% |
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).
Technical Analysis: USD/INR aims to extend upside above 86.50
USD/INR extends three-day winning streak and jumps to near 86.50 at open on Monday, the highest level seen in four weeks. The near-term trend of the pair is bullish as the 20-day Exponential Moving Average (EMA) slopes higher around 86.00.
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.
Indian economy FAQs
The Indian economy has averaged a growth rate of 6.13% between 2006 and 2023, which makes it one of the fastest growing in the world. India’s high growth has attracted a lot of foreign investment. This includes Foreign Direct Investment (FDI) into physical projects and Foreign Indirect Investment (FII) by foreign funds into Indian financial markets. The greater the level of investment, the higher the demand for the Rupee (INR). Fluctuations in Dollar-demand from Indian importers also impact INR.
India has to import a great deal of its Oil and gasoline so the price of Oil can have a direct impact on the Rupee. Oil is mostly traded in US Dollars (USD) on international markets so if the price of Oil rises, aggregate demand for USD increases and Indian importers have to sell more Rupees to meet that demand, which is depreciative for the Rupee.
Inflation has a complex effect on the Rupee. Ultimately it indicates an increase in money supply which reduces the Rupee’s overall value. Yet if it rises above the Reserve Bank of India’s (RBI) 4% target, the RBI will raise interest rates to bring it down by reducing credit. Higher interest rates, especially real rates (the difference between interest rates and inflation) strengthen the Rupee. They make India a more profitable place for international investors to park their money. A fall in inflation can be supportive of the Rupee. At the same time lower interest rates can have a depreciatory effect on the Rupee.
India has run a trade deficit for most of its recent history, indicating its imports outweigh its exports. Since the majority of international trade takes place in US Dollars, there are times – due to seasonal demand or order glut – where the high volume of imports leads to significant US Dollar- demand. During these periods the Rupee can weaken as it is heavily sold to meet the demand for Dollars. When markets experience increased volatility, the demand for US Dollars can also shoot up with a similarly negative effect on the Rupee.
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.
