|

USD/INR climbs on renewed US Dollar demand

  • Indian Rupee softens in Friday’s early European session. 
  • Persistent interbank USD demand and foreign fund outflows weigh on the INR, but lower crude oil prices might cap its downside. 
  • Traders await the US housing data and the preliminary University of Michigan Consumer Sentiment Index report.

The Indian Rupee (INR) loses momentum on Friday. The renewed US Dollar (USD) demand from importers and continued foreign fund outflows weigh on the Indian currency. However, a fall in crude oil prices amid reports that the US and Iran are getting closer to a deal on the country’s nuclear program might help limit the INR losses. It’s worth noting that India is the world's third-largest oil consumer, and lower crude oil prices tend to have a positive impact on the INR value.

Later on Friday, traders brace for the US Building Permits, Housing Starts and the preliminary University of Michigan Consumer Sentiment Index. The Federal Reserve (Fed) official Thomas Barkin is scheduled to speak later in the same day. 

Indian Rupee attracts some sellers amid US Dollar demand

  • The dollar-rupee overnight swap rate also dipped, pointing to heightened demand for cash dollars, which typically indicates a pickup in outflows, a trader said. 
  • India has sought to clinch a trade deal with the US within the 90-day pause announced by Trump on April 9 on tariff hikes for major trading partners.
  • The US Producer Price Index (PPI) rose 2.4% YoY in April, following the 2.7% increase in March, according to the Bureau of Labor Statistics on Thursday. This figure came in below the market expectation of 2.5%.
  • The US Initial Jobless Claims for the week ending May 10 came in at 229K, compared to the previous week's revised tally of 229K (revised from 228K), according to the US Department of Labor (DOL) on Thursday. This reading matched initial estimates. 
  • Continuing Jobless Claims went up by 9K to reach 1.881M for the week ending May 3.

USD/INR holds a bearish bias under the 100-day EMA

The Indian Rupee trades weaker on the day. The negative view of the USD/INR pair remains in play, characterized by the price being above the key 100-day Exponential Moving Average (EMA) on the daily chart. Nonetheless, the 14-day Relative Strength Index (RSI) hovers around the midline, suggesting further consolidation or temporary recovery cannot be ruled out.

The initial support level for USD/INR emerges at 84.95, the low of April 28. A clear break below this level could drag the pair lower to 84.61, the low of May 12, followed by 84.12, the low of May 5.

On the bright side, the first upside barrier is seen at 85.60, the 100-day EMA. Green candlesticks and a clear bounce above the mentioned level could see a rally to the 86.00-86.05 zone, which marks both a round figure and the upper boundary of the trend channel. 

RBI FAQs

The role of the Reserve Bank of India (RBI), in its own words, is "..to maintain price stability while keeping in mind the objective of growth.” This involves maintaining the inflation rate at a stable 4% level primarily using the tool of interest rates. The RBI also maintains the exchange rate at a level that will not cause excess volatility and problems for exporters and importers, since India’s economy is heavily reliant on foreign trade, especially Oil.

The RBI formally meets at six bi-monthly meetings a year to discuss its monetary policy and, if necessary, adjust interest rates. When inflation is too high (above its 4% target), the RBI will normally raise interest rates to deter borrowing and spending, which can support the Rupee (INR). If inflation falls too far below target, the RBI might cut rates to encourage more lending, which can be negative for INR.

Due to the importance of trade to the economy, the Reserve Bank of India (RBI) actively intervenes in FX markets to maintain the exchange rate within a limited range. It does this to ensure Indian importers and exporters are not exposed to unnecessary currency risk during periods of FX volatility. The RBI buys and sells Rupees in the spot market at key levels, and uses derivatives to hedge its positions.

Author

Lallalit Srijandorn

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

More from Lallalit Srijandorn
Share:

Editor's Picks

AUD/USD bounces back toward 0.6950 on fresh USD supply

AUD/USD bounces back toward 0.6950 in the Asian session on Friday. The US Dollar retreats from 17-month highs as traders take profits off the table ahead of the all-important US Nonfarm Payrolls report. Meanwhile, the Australian Dollar draws support from reviving expectations of a November interest rate hike amid elevated global yields and inflation risks.


USD/JPY struggles near 158.00 as USD retreats ahead of NFP

USD/JPY is struggling for fresh impetus near 158.00, moving away from the top end of its weekly range in the Asian session on Friday, after hotter-than-expected Tokyo CPI and amid a broad US Dollar retreat. Traders reposition themselves ahead of US Nonfarm Payrolls.

Gold fades the earlier optimism; back below $4,200

Gold could not sustain the post-NFP bull run past the $4,200 mark per troy ounce, receding toward the $4,180 region at the end of the week. The precious metal’s inconclusive price action comes amid fresh selling pressure hurting the US Dollar as investors assess the latest NFP data.

Crypto Today: Bitcoin, Ethereum and XRP gains reinforce bullish outlook

Cryptocurrency prices are broadly recovering on Friday, led by Bitcoin moving above $86,000. Ethereum has reaffirmed its bullish outlook, rising above $2,700 while the immediate area at $2,800 caps upside. Meanwhile, Ripple hovers near $1.54.

Week ahead – Fed minutes in the spotlight amid bond market rout

Energy crisis and soaring bond yields to stay in driver’s seat in quiet week. Fed minutes eyed after drop in October rate hike bets. ISM services PMI and Treasury auctions to be watched too. Canadian employment, Japanese wages and ECB minutes also on tap.

The Euro is near a one-year low: Inflation could trigger its rebound, not its fall

EUR/USD has fallen to its lowest level since May 2025. The pair hit 1.1312 on Wednesday and trades well below the January peak of 1.2082. The decline reflects a powerful combination of US Dollar strength, geopolitical uncertainty and renewed concerns about Europe's exposure to higher energy prices.