The Indian Rupee (INR) edges higher against the US Dollar (USD) at the start of the week. The USD/INR pair drops to near 88.25 after posting a fresh all-time high slightly above 88.50 on Friday. The pair retraced quickly from its all-time high, following likely intervention of the Reserve Bank of India (RBI) to support the Indian Rupee, according to a report from Reuters.
- Meme Coin Rally Ahead? Dogecoin, Shiba Inu & Pepe Price Predictions
- Today USDINR gains ahead of India GST council meeting, US data
- Today Indian Rupee Slides to Record Low
- USD/INR jumps amid tensions over Kashmir, rising US Dollar demand
- US Dollar near familiar range after PCE data
The outlook of the Indian Rupee remains vulnerable as Foreign Institutional Investors (FIIs) continue to pare stake from the Indian stock market due to ongoing trade tensions between the United States (US) and India. In August, Washington raised tariffs on imports from New Delhi to 50% for buying Oil from Russia, which US President Donald Trump called a scenario that is funding Moscow for continuing the war in Ukraine.
However, on Friday, the comments from US President Trump signaled that he could mend fences with India. Trump said while responding to reporters that India and the US have a special relationship and there’s nothing to worry about the ties between the nations. These comments from Trump came after reporters asked about whether he wants to reset relations with India.
On Friday, FIIs sold Indian equities worth Rs. 1,304.91 crores. In September, overseas investors have pared stake worth Rs. 5,666.901 crores. Foreign investors have extended their sell-off for the third month in a row. In July and August, FIIs sold equities worth Rs. 94,569.6 crores cumulatively.
- 1 This week, investors will focus on key US CPI data for August
- 2 Technical Analysis: USD/INR remains upbeat as 20-day EMA slopes higher
- 3 FAQs:
- 3.1 Q1. Why did the Indian Rupee edge higher against the US Dollar this week?
- 3.2 Q2. What caused USD/INR to drop near 88.25 from its recent peak?
- 3.3 Q3. How are Foreign Institutional Investors (FIIs) impacting the Indian Rupee?
- 3.4 Q4. What role do US-India trade tensions play in USD/INR volatility?
- 3.5 Q5. Did US President Trump’s comments affect the Rupee?
- 3.6 Q6. Why are traders expecting a Fed rate cut in September?
- 3.7 Q7. What are the chances of the Fed cutting interest rates by 50 basis points?
- 3.8 Q8. How is the US labor market influencing the USD?
- 3.9 Q9. What key economic data should traders watch this week?
- 3.10 Q10. What does technical analysis suggest for USD/INR?
This week, investors will focus on key US CPI data for August
- A slight downtick in the USD/INR pair is also driven by uncertainty surrounding the US Dollar’s outlook, following the opening of hopes of a larger-than-usual interest rate cut by the Federal Reserve (Fed) in its monetary policy meeting next week.
- During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, ticks up to near 97.80 after a sharp decline on Friday.
- According to the CME FedWatch tool, traders see a 10% chance that the Fed will reduce interest rates by 50 basis points (bps) to 3.75%-4.50% in the September policy meeting.
- Fed dovish bets for a bumper rate cut have stemmed from deteriorating labor market conditions in the wake of the tariff policy imposed by US President Trump.
- August’s Nonfarm Payrolls (NFP) report showed on Friday that the US economy added 22K fresh workers, significantly lower than expectations of 75K and the prior reading of 79K. This was the slowest growth in the overall labor force seen since January 2021. The Unemployment Rate accelerated to 4.3%, as expected, from the prior reading of 4.2%.
- Fed dovish expectations also escalated significantly in early August after July’s NFP report showed a significant revision in May and June’s employment figures on the downside.
- Lately, Federal Open Market Committee (FOMC) members, including Chair Jerome Powell, have also argued in favor of reducing interest rates amid growing downside labor market risks.
- This week, the major trigger for the US Dollar will be the Consumer Price Index (CPI) data for August, which is scheduled for Thursday.
Technical Analysis: USD/INR remains upbeat as 20-day EMA slopes higher
The USD/INR pair corrects to near 88.25 from its all-time high posted on Friday. The near-term trend of the pair remains bullish as it holds above the 20-day Exponential Moving Average (EMA), which trades near 87.80.
The 14-day Relative Strength Index (RSI) trades calmly above 60.00, suggesting that a fresh bullish momentum has come into effect.
Looking down, the 20-day will act as key support for the major. On the upside, the round figure of 89.00 would be the key hurdle for the pair.
FAQs:
Q1. Why did the Indian Rupee edge higher against the US Dollar this week?
The Indian Rupee gained strength as the USD/INR pair retraced from its all-time high of 88.50, likely due to Reserve Bank of India’s (RBI) intervention to stabilize the currency.
Q2. What caused USD/INR to drop near 88.25 from its recent peak?
The retracement was mainly triggered by RBI’s likely market intervention and profit booking after the pair touched a fresh all-time high.
Q3. How are Foreign Institutional Investors (FIIs) impacting the Indian Rupee?
FIIs have been consistently selling Indian equities, withdrawing over Rs. 5,666 crores in September so far, which weakens investor sentiment and adds pressure on the Rupee.
Q4. What role do US-India trade tensions play in USD/INR volatility?
Trade tensions, such as the US raising tariffs on Indian imports and criticism over India’s oil trade with Russia, have created uncertainty, fueling volatility in USD/INR.
Q5. Did US President Trump’s comments affect the Rupee?
Yes, Trump’s reassurance that US-India relations remain “special” helped calm markets slightly, easing concerns of worsening ties.
Q6. Why are traders expecting a Fed rate cut in September?
Weak US labor market data, including low job additions and rising unemployment, along with dovish signals from Fed officials, have fueled expectations of a rate cut.
Q7. What are the chances of the Fed cutting interest rates by 50 basis points?
According to the CME FedWatch Tool, there is a 10% probability that the Fed may opt for a larger-than-usual 50 bps rate cut in September.
Q8. How is the US labor market influencing the USD?
Recent Nonfarm Payroll (NFP) data showed weaker-than-expected job growth, raising concerns about the economy and boosting expectations of Fed easing, which pressures the US Dollar.
Q9. What key economic data should traders watch this week?
Investors will closely monitor the US Consumer Price Index (CPI) data for August, scheduled for Thursday, as it will guide the Fed’s rate decision.
Q10. What does technical analysis suggest for USD/INR?
USD/INR remains bullish above its 20-day EMA (87.80) with RSI above 60, indicating upward momentum. Key resistance is near 89.00, while support lies at 87.80.