The Indian rupee rises against the US dollar, hitting around 85.65
- India is not rushing to finalize a trade agreement with the US.
- Concerns about inflation driven by tariffs are noted in the FOMC discussions.
The Indian rupee (INR) is gaining ground against the US dollar (USD) this Thursday. The USD/INR pair has dropped to approximately 85.65, but market watchers in India and the US are closely analyzing the situation.
Recently, US President Donald Trump indicated that a trade deal with India was imminent. However, Indian Commerce Minister Piyush Goyal made it clear that New Delhi isn’t in a hurry to sign, emphasizing that any agreement must align with national interests.
“India won’t negotiate under pressure,” Goyal stated. “We prioritize national interests in all global engagements.”
A report from NDTV mentioned that both nations are focused on lowering trade barriers to foster a competitive atmosphere. Moreover, India is aiming to safeguard its agricultural sector and labor-intensive industries, like leather and textiles, from US competition.
These ongoing negotiations are affecting sentiment in the Indian stock market. The NIFTY50 index is down nearly 100 points from 25,400, and the Sensex30 has decreased by 0.3%, settling below 83,300.
Another contributing factor to the rupee’s strength is the anticipation of falling oil prices. OPEC+ recently announced plans to increase oil production, likely benefiting the Indian rupee since the country heavily relies on oil imports. If oil prices drop, the rupee may see more stability.
Daily Digest Market Update: Fed officials wary of near-term interest rate cuts
- The Indian rupee is strengthening against the US dollar, while the dollar itself is experiencing modest fluctuations amid uncertainties in trade policies.
- On Wednesday, the US president outlined new tariffs affecting seven nations that missed out on a trade agreement during a 90-day period. However, these additional tariffs are not expected to significantly impact trade since they exclude key countries.
- Considering the current status of negotiations with the Eurozone, China, Canada, and Mexico, it seems unlikely that the US will impose hefty tariffs on them. So far, Japan and South Korea have faced mutual tariffs.
- Additionally, Trump announced that a 50% tariff on copper imports will commence on August 1.
- On the monetary policy front, minutes from the Federal Open Market Committee (FOMC) meeting indicate that many officials believe interest rate cuts could be appropriate later this year if the inflation driven by tariffs is determined to be “limited and temporary.” They also noted that current borrowing rates are not far above neutral levels. Only a few members expressed an openness to considering rate cuts shortly after the July meeting.
- The CME FedWatch tool suggests a strong likelihood that the Fed will keep interest rates between 4.25% and 4.50% at its upcoming policy meetings.
Technical Analysis: USD/INR sees potential dip towards 85.00
The USD/INR is expected to open lower, heading towards 85.70. The pair experiences selling pressure above the 20-day exponential moving average (EMA) and trades around 85.87, indicating higher selling activity.
The 14-day relative strength index (RSI) is currently below 50.00, signaling potential bearish momentum if it dips below 40.00.
Key support for the currency pair is at the May 27 low of 85.10. Conversely, the June 24 low of 86.42 serves as an important resistance level.
