- Summary:
- USDINR has declined to the lowest level since December 2024 and the rising sour sentiment against the dollar favour an extended decline.
The Indian rupee strengthened against the US dollar on Thursday as the sour trade tariff sentiment got a stronger tempo. The USDINR traded at 85.37, down by 0.06% at the time of writing, hitting the lowest level in fourteen weeks. The decline is attributed to the latest US tariff announcements, which triggered widespread selloffs across financial markets.
US President Donald Trump’s decision to exempt pharmaceuticals from the historic tariffs have given the rupee ammunition to fight back after India made it to the list of the nations hardest hit by US reciprocal tariffs. India exported $8.7 billion worth of medicines to the US in 2024, underlining the significance of the exemption.
Trump announced a 26% tariff on imports from India, a move that came as a surprise considering Indian Prime Minister Narendra Modi’s hyped visit to the US in mid-February. That could reduce the competitiveness of Indian goods and result in reduced dollar inflows into the Indian economy. However, analysts opine that Trump’s move is likely meant to push Modi to agree a trade deal faster.
On the other hand, the harsh tariff environment has created a bearish sentiment around the US dollar on concerns that tariffs could trigger a recession in the US. The DXY index, which weighs the US dollar against six of the world’s largest currencies dropped 101.37 on Thursday, the lowest level in five months.
The decline was triggered by a selloff of the US dollar as the tariff shockwave cut across the market. That sentiment will likely continue exerting downward momentum on the USDINR pair. US Non Farm Payroll numbers will be out on Friday, and will inject fresh impetus in the market.
USDINR Prediction
The USDINR pair pivots at 85.40 and the downtrend will prevail if resistance persists at that level. With the sellers in control, the pair will likely go lower to the first support at 85.25. A stronger downward momentum will break below that level and take the action lower to test 85.70.
Conversely, the momentum will shift to the upside if the price breaks above 85.40, the momentum will favour the buyers to take control. That will likely see the first barrier encountered at 85.55. A break above that level will invalidate the downside narrative and potentially take the price higher to test 85.70.
