The Indian rupee gained against the US dollar for the second successive session on Wednesday, as trade tariff concerns and soft US economic data weighed on the dollar. The USDINR currency pair traded at 89.97 at the time of writing, down by 0.3% on the daily chart.
US tariffs against China, Canada and Mexico kicked in on Tuesday, with the three nations initiating retaliatory counter-tariffs in response. That is likely to keep inflation rate elevated and could slow down economic growth. Yields on benchmark 10-year US treasury bonds are currently near three-month lows, signaling rising probability of a contracting economy. That is likely to limit the upside for USDINR.
However, the pair still has support from rising foreign institutional outflows that are exerting high pressure on the rupee. The attrition on the rupee is tethered to the slowed growth by the Indian economy, with the impact spilling over to equities markets.
In the latest instance, the country’s February S&P Global Services PMI reading came out at 59.0, missing the median forecast figure of 61.1. However, interventions by the Reserve Bank of India (RBI) are likely to keep a relatively steady flow of the dollar in the economy and absorb some of the impact.
The momentum on USDINR calls for further downside if resistance stays below the pivot mark at 87.08. The pair will likely find initial support at 86.87, but a stronger momentum will break below that level and potentilly go lower to find the second support at 87.68.
Alternatively, the momentum will shift to the upside if USDINR breaks above 87.08. If that happens, the pair is likely to head higher to find the first resistance at 87.24. The downside narrative will be invalid if action goes above that level. Also an extended control by the buyers could resuslt in further gains and test the second resistance at 87.40.
This post was last modified on Mar 05, 2025, 09:58 GMT 09:58