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USD/INR remains firm amid US-India trade tensions

  • The Indian Rupee trades flat around 88.90 against the US Dollar; the outlook remains bearish.
  • FIIs continue to pare investments in the Indian stock market amid US-India trade tensions.
  • US President Trump wants Democrats to allow the government to reopen before negotiating on healthcare benefits.

The Indian Rupee (INR) wobbles around 88.90 against the US Dollar (USD) on Tuesday. The USD/INR pair extends its sideways trend for the 10th straight trading day near its all-time high of 89.10, as investors remain cautious amid ongoing trade tensions between the United States (US) and India.

The US economy has been charging 50% tariffs on imports from India, close to the highest among its trading partners, as New Delhi continues to purchase Oil from Russia. Washington has criticized New Delhi for buying Russian Oil, citing that funds from India are ultimately supporting Moscow to continue the war with Ukraine.

US-India trade tensions have remained a significant hindrance to the sentiment of foreign investors towards India as an investment destination. During the July-September period, Foreign Institutional Investors (FIIs) sold equity shares worth Rs. 1,29,870.96 crore in the Indian stock market. So far in October, FIIs have sold shares worth Rs. 3,502.34 crores.

Despite continuous selling by overseas investors, the Indian stock market has performed strongly over the last three trading days, with the Nifty50 gaining 2.45% to near 25,200.

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.

USDEURGBPJPYCADAUDINRCHF
USD0.22%0.22%0.14%0.09%0.22%0.02%0.06%
EUR-0.22%0.01%-0.05%-0.12%0.02%-0.19%-0.02%
GBP-0.22%-0.01%-0.08%-0.13%0.05%-0.21%-0.04%
JPY-0.14%0.05%0.08%-0.04%0.11%-0.12%-0.09%
CAD-0.09%0.12%0.13%0.04%0.11%-0.04%0.10%
AUD-0.22%-0.02%-0.05%-0.11%-0.11%-0.19%-0.10%
INR-0.02%0.19%0.21%0.12%0.04%0.19%0.01%
CHF-0.06%0.02%0.04%0.09%-0.10%0.10%-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).

Firm Fed dovish bets are expected to keep a lid on the US Dollar’s upside

  • A slight strength demonstrated by the US Dollar in the wake of weakness in the Euro (EUR) and the Japanese Yen (JPY) due to political crisis in France and the election of fiscal dove Sanae Takaichi as Prime Minister in Japan, respectively, is also keeping the USD/INR pair on the front foot.
  • During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades marginally higher to near 98.20.
  • On the domestic front, the ongoing US government shutdown and firm Federal Reserve (Fed) dovish bets are expected to keep a lid on the US Dollar’s upside. Monday’s session of the US Senate ended without the stopgap bill being passed, with Democrats remaining stuck to their view that they won’t support a spending bill until the White House rolls back cuts announced in the health benefits program earlier this year.
  • In response, the White House refrains from negotiating on healthcare benefits with Democrats until they allow the government to reopen. “I am happy to work with the Democrats on their Failed Healthcare Policies, or anything else, but first they must allow our Government to reopen,” Trump wrote in a post on Truth.Social. 
  • On the monetary policy front, traders seem confident that the Fed will cut interest rates by 25 basis points (bps) in each of its remaining two policy meetings this year, according to the CME FedWatch tool. Fed dovish expectations have been promoted by deteriorating job market conditions.
  • For more cues on the interest rate outlook, investors will focus on Fed Chair Jerome Powell’s speech, which is scheduled for Thursday.

Technical Analysis: USD/INR trades sideways around 89.00

USD/INR wobbles near 89.00 for over a week. The near-term trend of the pair remains bullish as the 20-day Exponential Moving Average (EMA) slopes higher around 88.62.

The 14-day Relative Strength Index (RSI) stays above 60.00, suggesting a strong bullish momentum.

Looking down, the pair could slide to near the September 12 high of 88.57 and the 20-day EMA, if it breaks below the September 25 low of 88.76.

On the upside, the pair could extend its rally towards the round figure of 90.00 if it breaks above the current all-time high of 89.12.

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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