- The Indian Rupee attracts some sellers in Thursday’s early European session.
- Trump plans to implement a 26% tariff on Indian imports, weighing on the INR.
- The US weekly Initial Jobless Claims and ISM Services PMI will be the highlights later on Thursday.
The Indian Rupee (INR) remains under selling pressure on Thursday, pressured by the weakening in Asian equity and currency markets after US President Donald Trump imposed broad-based tariffs. Trump said on Wednesday that he would impose 26% tariffs on imports from India effective from April 9, a component of his comprehensive plan to place duties on all US imports. New US tariff policies under the Trump administration exert some selling pressure on the INR.
Nonetheless, a fall in crude oil prices could help limit the Indian currency’s losses. It’s worth noting that India is the world's third-largest oil consumer, and lower crude oil prices tend to have a positive impact on the INR value.
Looking ahead, investors brace for the US weekly Initial Jobless Claims, the final S&P Global Services PMI, and the ISM Services PMI, which are due later on Thursday. On Friday, all eyes will be on the US March Nonfarm Payrolls report.
Indian Rupee slumps after new tariffs announcement by Trump
- Trump said at the White House while announcing the reciprocal tax. ”They (India) are charging us 52% and we charge almost nothing for years and years and decades.”
- The final reading of India’s HSBC Manufacturing PMI rose to 58.1 in March, compared to the first estimates and the consensus of 57.6.
- In March, the Indian Rupee posted its best monthly performance in more than six years, bolstered by foreign portfolio and other inflows, coupled with a scaling back of bearish wagers.
- Foreign investors bought nearly $4 billion of Indian equities and bonds, a significant reversal from approximately $12 billion in outflows seen in January and February.
- The Trump administration on Wednesday announced that the US will impose a 10% baseline tariff on all imports to the United States and slap additional duties on around 60 nations with the largest trade imbalances with the US.
- US Treasury Secretary Scott Bessent late Wednesday warned trading partners that any retaliation to the barrage of new tariffs from the White House would only result in further escalation.
- Fed Governor Adriana Kugler said on Wednesday that rising tariffs in the US could feed into more prolonged inflation than might be expected, per Reuters.
USD/INR keeps the bearish vibe despite a bullish retaliation
The Indian Rupee trades in negative territory on the day. According to the daily chart, the negative view of the USD/INR pair remains intact as the price is below the key 100-day Exponential Moving Average (EMA). The downward momentum is supported by the 14-day Relative Strength Index (RSI), which is located below the midline near 38.15.
The initial support level for USD/INR emerges at 85.42, the low of April 2. The next contention level to watch is the 85.00 psychological level. Further south, the downside target is seen at 84.84, the low of December 19.
The first upside barrier for the pair is located at the 85.90-86.00 region, representing the 100-day EMA and round figure. A decisive break above this level could see a rally to 86.48, the low of February 21, en route to 87.00, the round mark.
Indian Rupee FAQs
The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.
The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.
Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.
Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.
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