USD/INR Surges Amid Increased Month-End Demand for US Dollar.

Indian Rupee Weakens Amid Strong USD Demand and Foreign Outflows – USD/INR Outlook Remains Bullish

The Indian Rupee (INR) continues to decline, facing pressure from strong month-end US Dollar (USD) demand by importers and persistent foreign capital outflows. Investor sentiment remains cautious amid uncertainties surrounding US trade tariffs, further contributing to INR’s downside. However, potential foreign exchange intervention by the Reserve Bank of India (RBI) may help limit excessive depreciation.

Key Factors Driving INR Weakness

1. Month-End USD Demand – Importers are increasing their USD purchases, adding pressure on the Rupee.
2. Foreign Capital Outflows – Continued foreign institutional investor (FII) sell-offs weigh on the local currency.
3. Crude Oil Prices & US Tariffs on Iran – Rising oil prices, coupled with US tariffs, are boosting oil demand, further straining the INR.
4. US Dollar Strength – The US Dollar Index (DXY) at 106.65 has added to the downward momentum of the Rupee.

According to Jateen Trivedi, Research Analyst at LKP Securities, “The Rupee traded very weak as FII sell-offs continued and crude oil prices remained elevated amid US tariffs on Iran, which pushed oil demand higher. The Dollar Index at 106.65 also added to the pressure on the Rupee.”

Additionally, concerns over US trade policies have intensified after US President Donald Trump reaffirmed 25% tariffs on Canada, Mexico, and the European Union (EU), raising fears of a global economic slowdown.

Market Watch: Key US Economic Data in Focus

Traders are now closely monitoring the upcoming US Q4 Gross Domestic Product (GDP) data and weekly Initial Jobless Claims, both scheduled for release later today. These reports, along with key statements from Federal Reserve (Fed) officials, could provide further insights into the US interest rate outlook.

Fed officials Michelle Bowman, Beth Hammack, and Patrick Harker are set to speak, potentially offering guidance on future rate decisions.

• Atlanta Fed President Raphael Bostic has reiterated that interest rates should remain steady to curb inflation.
• Richmond Fed President Thomas Barkin has taken a wait-and-see approach, awaiting clear signs of inflation returning to the Fed’s 2% target before advocating policy adjustments.

USD/INR Technical Outlook – Bulls in Control

Despite short-term consolidation, USD/INR remains bullish, holding above the 100-day Exponential Moving Average (EMA) on the daily chart. The 14-day Relative Strength Index (RSI) stands above 59.50, indicating strong upward momentum.

• Key Resistance Levels:

  • 87.25 – High of February 25
  • 88.00 – Potential all-time high
  • 88.50 – Next upside target

• Support Levels to Watch:

  • 86.48 – Low of February 21
  • 86.14 – Low of January 27
  • 85.65 – Low of January 7

Conclusion

The Indian Rupee remains under pressure, with strong USD demand, foreign capital outflows, and rising crude oil prices weighing on its value. While the RBI may intervene to curb excessive depreciation, the overall USD/INR trend remains bullish.

Market participants should stay alert to upcoming US economic data releases and Fed commentary, which could influence the next move in USD/INR exchange rates.