- The Indian rupee gained traction in early European sessions on Wednesday.
- RBI interventions can help limit INR losses.
- CPI inflation data for India and the US will be highlighted later on Wednesday.
The Indian rupee (INR) is upside down on Wednesday, strengthened by strong intervention from the Reserve Bank of India (RBI). Furthermore, US dollar (USD) sales by exporters and profit bookings by speculators support local currency to some extent.
However, concerns about India's slowdown, widening trade deficits, rising oil prices and risks of fresh US trade tariffs could limit the benefits of INR. Later on Wednesday, investors will focus on India's Consumer Price Index (CPI), industrial production and manufacturing output for January. CPI inflation is closely monitored at US dockets. Federal Reserve's Raphael Bostic and Christopher Waller will also talk.
Indian rupee is strengthened despite trade tensions
- “The central bank's decisive hand is likely to stabilize the rupee in the short term, and the direction that follows should be determined by the global dollar movement,” DBS Bank said in a memo.
- The Indian rupee has depreciated 3.60% since September 2024. This includes the Japanese yen (-6.49%), the Canadian dollar (-5.71%), the British pound (-7.58%), the Australian dollar (-9.04%) and the euro (-7.53%), according to Bloomberg data.
- Foreign investors have withdrawn more than $7.5 billion on a net basis from Indian stocks and bonds so far this year.
- In a six-month report to Congress, Fed Powell said Fed officials “don't have to hurry” to cut interest rates for the strength of the job market and solid economic growth.
- Powell further said Donald Trump's tariff policies could put more upward pressure on prices, making it difficult for central banks to cut fees.
USD/INR shooting star has been confirmed, downward pressure is expected in the short term
Indian rupees are higher at the edge of the day. According to the Daily Chart, the USD/INR pair keeps the bullish vibe above the 100-day exponential moving average (EMA), indicating that support is likely to be held rather than broken.
Furthermore, the upward momentum is strengthened by the 14-day relative strength index (RSI) above the midline at nearly 53.00, suggesting an even more favorable rise.
The first upside target of USD/INR appears at a psychological level of 87.00. A sustained trade above this level could pave the way for an all-time high of nearly 88.00. Further north, the next hurdle is seen at 88.50.
On the other hand, the initial support level is at 86.51, which is the lowest level on February 3rd. Bearish candlesticks below the aforementioned levels could expose the January 27th lowest, 86.14.
