- 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.
RBI FAQs
The role of the Reserve Bank of India (RBI), in its own words, is “..to maintain price stability while keeping in mind the objective of growth.” This involves maintaining the inflation rate at a stable 4% level primarily using the tool of interest rates. The RBI also maintains the exchange rate at a level that will not cause excess volatility and problems for exporters and importers, since India’s economy is heavily reliant on foreign trade, especially Oil.
The RBI formally meets at six bi-monthly meetings a year to discuss its monetary policy and, if necessary, adjust interest rates. When inflation is too high (above its 4% target), the RBI will normally raise interest rates to deter borrowing and spending, which can support the Rupee (INR). If inflation falls too far below target, the RBI might cut rates to encourage more lending, which can be negative for INR.
Due to the importance of trade to the economy, the Reserve Bank of India (RBI) actively intervenes in FX markets to maintain the exchange rate within a limited range. It does this to ensure Indian importers and exporters are not exposed to unnecessary currency risk during periods of FX volatility. The RBI buys and sells Rupees in the spot market at key levels, and uses derivatives to hedge its positions.
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