The Indian Rupee (INR) weakened during Wednesday’s early European trading session amid anticipation of US President Trump’s planned tariff implementation on US trading partners. The INR’s decline follows a period of appreciation, driven by a weaker US Dollar and increased foreign equity inflows.
Market analysts suggest the INR’s short-term performance is contingent upon the impact of the anticipated US tariffs on global trade and economic growth. Investors are also awaiting the release of the US March ADP Employment Change data and monitoring remarks from Federal Reserve officials.
The Reserve Bank of India (RBI) is scheduled to announce its interest rate decision next week. A Reuters poll indicates expectations of a single additional rate cut in August, potentially exerting further downward pressure on the INR.
In March, the INR experienced its strongest monthly performance in over six years, supported by foreign portfolio investments and a reduction in bearish positions. Overseas investors injected approximately $4 billion into Indian equities and bonds, reversing significant outflows observed in January and February.
Kotak Institutional Equities noted that while the INR has benefited from Dollar weakness and RBI policy, uncertainties surrounding US trade policies remain a key risk to India’s external sector balance.
President Trump’s announcement of “reciprocal tariffs” on countries with existing duties on US goods is expected to introduce new trade barriers. US Treasury Secretary Scott Bessent indicated that the announced tariff levels would be the maximum, with potential for future reductions.
Recent US economic data revealed a decline in the ISM Manufacturing Purchasing Managers Index (PMI) to 49.0 in March. Chicago Fed President Austan Goolsbee commented on the strength of US hard data contrasted with weakening soft data, citing inflation-related uncertainty.
Technically, the USD/INR pair maintains a bearish outlook, trading below the 100-day Exponential Moving Average (EMA). The Relative Strength Index (RSI) suggests continued downward momentum. Key support levels are identified at 85.00 and 84.84, with a further target at 84.22. Resistance is observed in the 85.90-86.00 range, with potential upside targets at 86.48 and 87.00.
