The Indian Rupee (INR) weakened during Wednesday’s Asian trading session, influenced by anticipation of US President Trump’s planned tariff implementation on major trading partners. This follows the INR’s strongest monthly gain in over six years, driven by USD weakness and foreign equity inflows.
Market analysts anticipate that the INR’s short-term performance will be contingent upon the impact of the aforementioned US tariffs on global trade and economic growth. Investors are also awaiting 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, with a Reuters poll suggesting a potential single rate cut in August, potentially exerting mild downward pressure on the INR.
In March, the INR benefited from significant foreign portfolio investment, reversing previous outflows. However, concerns persist regarding the impact of US trade policies on India’s external sector. Trump’s announcement of “reciprocal tariffs” on countries with existing duties on US goods is expected to introduce new trade barriers.
Recent US economic data indicates a decline in the ISM Manufacturing Purchasing Managers Index (PMI), while Chicago Fed President Austan Goolsbee noted strong hard data contrasted with weakening soft data and inflation-related uncertainty.
From a technical perspective, the USD/INR pair maintains a bearish outlook, trading below the 100-day Exponential Moving Average (EMA). The Relative Strength Index (RSI) suggests further downside potential. Key support levels are identified at 85.00 and 84.84, with a subsequent target at 84.22. Conversely, resistance is observed in the 85.90-86.00 range, coinciding with the 100-day EMA. A sustained upward movement could target 86.48 and then 87.00.
