The Indian Rupee (INR) experienced a decline during the Friday session in Asia, breaking a two-day winning streak. The depreciation is attributed to rising demand for the US Dollar (USD), increased foreign portfolio outflows from Indian equities, and uncertainty surrounding potential tariff announcements from the United States. This combination of factors has put pressure on the local currency.
Despite the challenging environment, the Reserve Bank of India (RBI) has opted for a hands-off approach, allowing the rupee to fluctuate with minimal intervention. This strategy may help to mitigate significant losses for the INR. Furthermore, a decrease in crude oil prices could lend some support, given that India ranks as the world’s third-largest oil consumer.
Market participants are awaiting key economic indicators, including the preliminary reading of the Purchasing Managers Index (PMI) from HSBC India, as well as the US S&P PMI data, both of which are expected later on Friday. These reports could provide insights into economic activity and subsequently influence the currency market.
The outlook for the Indian Rupee remains complicated by geopolitical factors, particularly as commentary from international leaders has raised concerns about the currency’s stability. The rupee has depreciated approximately 5% over the past two years and 20% over the last five years, making it one of the weakest currencies in the South and Southeast Asian regions.
Recent data from the United States showed an increase in initial jobless claims, signaling potential economic weaknesses. This has not altered the prevailing upward trend of the USD/INR exchange rate. As the rupee continues to trade on the weaker side, the USD/INR pair is expected to maintain its upward trajectory, with crucial resistance levels identified around 86.69 and a psychological target at 87.00. On the downside, initial support is seen at 86.18, with lower targets at 85.85 and 85.65 if downward momentum continues.
