- The Indian rupee comes under renewed pressure in the form of increased geopolitical tension between India and Pakistan.
- India’s declaration to neutralize military threats with the northern and western borders of India has increased the risk in domestic markets.
- The Reserve Bank of India is expected to step into, which indicates the intention of curbing the depreciation of excessive rupees.
Indian Rupee (INR) loses ground against US Dollar (USD), expanding its loss for the fourth session on Friday. The USD/INR pair was opened with a difference after about 1% profit in the previous day. Traders will probably be awaited by India’s FX reserved data later in the day.
INR renewed amid growing geopolitical tension between India and Pakistan. India reported neutralizing military threats with its northern and western borders, causing risk in domestic markets. The Indian drone strike and the shooting claims of the drone of Pakistan, intensifying investors’ concerns and weighing on INR were more disturbing.
A trader notes that it is very likely that the Reserve Bank of India (RBI) will interfere with his reluctance to bear the depreciation of uncontrolled rupees. Without RBI support, he warns, the real risk of the USD/INR pair which is reverse.
After India’s attacks in Pakistan, the volumes on Indian rupee options increased, suggesting that the currency could go through an unstable patches behind the increased stress between two atomic-head neighbors. The increase in versions did not reveal a remarkable directional bias. The partition between calls and put options was quite specific. This indicates that the markets are “instability” instead of the situation for depreciation of one rupee, Reuters cited a senior foreign currency merchant in a bank.
The USD/INR appreciates a strong US dollar (USD), the Federal Reserve (Fed) is promoted by the Hawkish trend, and the rising crude oil prices pressurize the Indian rupee. While INR is expected to remain under stress, the potential support from foreign institutional investor (FII) can limit negative risk until the tension beyond the line of control becomes faster.
US rupee depreciates as US dollar which grows after strong American data
- The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against a basket of currencies, is trading around 100.60 by strong US economic data. US President Donald Trump announced a “major” trade deal with the United Kingdom (UK), although the major tariffs will remain at 10%, which limits market enthusiasm.
- American citizens who filed new applications for unemployment insurance decreased by 228k for the week ended on May 3. The print came just below the initial estimates and was lower than the unpublished tally of 241K last week. The report also highlighted a seasonally adjusted insured unemployment rate of 1.2%, while the moving average of four-week increased from 1K to 226K from the unpredited average of the pre-week week. In addition, the continuous unemployed claims went down to 29k to reach 1.879 meters for the week ended on 26 April.
- President Trump has taken a firm stand on China’s trade policy after the appointment of a new envoy for Beijing. While the tariff is discussed around the discount, the administration appears cautious, Trump said that they are “not looking for so many discounts.”
- According to the Global Times, Beijing is unlikely to reduce tariffs before the upcoming negotiations in Switzerland, citing the Chinese Embassy in the United States. It combines the uncertainty of the market and moist to the feeling of risk.
- Fed on Wednesday kept the interest rates stable at 4.25% -4.50%, but its statement acknowledged the rising risks related to inflation and unemployment, injuring fresh uncertainty in the markets. According to CME’s Fedwatch Tool, market participants are still expecting a quarterly-point rate cut in July.
- Fed Chair Jerome Powell mentioned during the press conference that American trade tariffs may disrupt Fed’s objectives for inflation and employment in 2025. Powell indicated that frequent policy instability may force the fed to the more patient, wait-and look at the future rate adjustment.
- US Treasury Secretary Scott Bassant and trade representative Jaimison Greer have been designed to meet with the Chinese Vice Premier in Geneva over the weekend, marking the US’s first high-level dialogue since implementing the US tariff that increased into a global trade dispute.
- India and Pakistan on Thursday traded allegations on cross -border drone attacks. According to the Indian Army, the armed forces of Pakistan carried out several attacks using drones and other sages on the entire western border of India during the night between Thursday and Friday night.
- The Government of India confirmed that it had targeted the air defense radar and systems at many places in Pakistan, retaliating Pakistan’s attempt to attack several military goals in northern and western India.
- Traders have estimated India’s 10 -year government bond yield to remain in 6.30% -6.40% range this week, focusing on bond procurement and geopolitical development between India and Pakistan.
- The recent decline in yields is inspired by the forward rate cut and expectations of the Reserve Bank of India (RBI), which according to the Reuters maintains surplus liquidity in the banking system through the ongoing open market operations (OMOS).
UsD/INR increases near 86.00, the upper limit of the ascending channel
With USD/INR trading near 85.90 on Friday, Indian rupees are weakening. Technical indicators on the daily charts maintain a recession prejudice, as the pair remains limited within a descending channel. However, a change in speed is indicated by a 14-day relative power index (RSI), which has climbed above 50 levels, which suggests a rapid emerging feeling.
Immediate support is located at a nine-day exponential moving average (EMA) around 85.05, which is closely associated with the major psychological levels of 85.00. A decisive brake below the region can reduce short -term rapid efforts and open the door for a decline towards the lower range of the channel near 84.00. Violation of this level can accelerate sales pressure, potentially leading the pair to its eight -month low 83.76.
Inverted, a high trick can challenge the upper range of descending channels around 86.10, a high trick of the USD/INR pair, with a two -month high and resistance to the two months of 86.71.
USD/INR: Daily Chart
Indian rupee
Indian rupee (INR) is one of the most sensitive currencies for external factors. The price of crude oil (country is highly dependent on imported oil), US dollar value – most trade is conducted in USD – and the levels of foreign investment are all impressive. To keep the exchange rate stable, FX markets have direct intervention by the Reserve Bank of India (RBI), as well as the level of interest rates set by the RBI, on the rupee and the major affected factors.
The Reserve Bank of India (RBI) actively interfere with foreign exchange markets to maintain a stable exchange rate, so that it can help in facilitating business. In addition, the RBI tries to maintain inflation rate at its 4% target by adjusting interest rates. High interest rates usually strengthen the rupee. This is due to the role of ‘Carry Trade’ in which investors borrow in countries with low interest rates so that they invest their money in countries’
Macroeconomic factors that affect the value of rupee include inflation, interest rate, economic growth rate (GDP), balance of business and influx from foreign investment. A high growth rate can lead to more foreign investment, increasing the demand for rupee. A low negative balance of business will eventually lead to a strong rupee. High interest rates, especially real rates (interest rates low inflation) are also positive for rupees. A risk-environment can lead to greater flow of foreign direct and indirect investment (FDI and FII), which also benefits the rupee.
High inflation, in particular, if it is comparatively higher than India’s companions, is generally negative to currency because it reflects devaluation through oversuply. Inflation also increases the cost of exports, which sells more rupees to buy foreign imports, which is rupee-negative. At the same time, high inflation usually leads to the Reserve Bank of India (RBI), which increases interest rates and may be positive for the rupee due to an increase in demand from international investors. The opposite effect is true of low inflation.
