USDINR traded flat in the European session on Wednesday going at 86.77 at the time of writing. The rupee is under pressure on increased dollar demand amid rising global crude oil prices. However, the Reserve Bank of India (RBI) interventions are likely to continue as the central bank will be keen on avoiding a retest of recent historic highs that took the USDINR pair near 88.00.
Crude oil prices rose by more than 1.5% on Tuesday and were up by 0.77% at press time, straining the rupee’s recovery efforts. India is the world’s third-largest importer of dollar-denominated crude oil, and the commodity’s increased demand denotes limited upside for the rupee.
Also, India’s economy is forecast to experience reduced growth rate in 2025, carrying over from the fourth quarter of 2024. The RBI projects that the economy will grow at 6.6% this year, the lowest in four years. That is already reflected in the domestic market and equities, where soft earnings reports have been driving foreign institutional investors to liquidate their holdings. A continuation of the trend could keep the USDINR on the uptrend.
Federal Open Market Committee (FOMC) minutes will be out later on Wednesday, and that will shed light on the Fed’s interest rate posture this year. In their recent comments, FOMC members have been indicating that high tariffs could necessitate keeping high interest rates in play. If that persists in the FOMC minutes, it could add propulsion to USDINR.
USDINR Prediction
USDINR pivots at 86.80 and action above that level will favour the upside to prevail. The pair will likely meet the first resistance at 86.88, but a stronger momentum could break above that level and potentially test 86.92.
Alternatively, the sellers will take control if the pair breaks above 86.80. If that happens, the first support at 86.78. Moreover, breaking above that level will invalidate the upside narrative. Also, a stronger downward momentum could break below that level and test the second support at 86.75.
