Key Takeaways
- The Indian Rupee (INR) saw an increase against the US Dollar (USD) as the week began, despite ongoing trade tensions and tariff threats.
- US President Trump’s remarks on potential tariffs and China trade negotiations are creating market fluctuations.
- Foreign Institutional Investors (FIIs) have shown reduced selling activity in Indian equities recently, offering some stability.
- Upcoming economic data from the US and India will be closely watched by market participants.
The USD/INR pair moved lower, approaching the 87.90 mark. This movement occurred even as US President Donald Trump had previously indicated that substantial tariffs on imports from India would persist unless the nation ceased its crude oil purchases from Russia.
Trump reiterated his tariff threats over the weekend, responding to questions regarding the assertion that India would halt its seaborne crude oil acquisitions from Russia. This followed a denial by the Indian ministry the previous week of Trump’s claim that Prime Minister Narendra Modi had assured him of such a cessation.
💡 India’s significant crude oil imports from Russia have been a prominent factor contributing to trade friction between New Delhi and Washington in recent months. Previous tariff hikes by Washington on Indian imports led to a notable depreciation of the Indian Rupee and considerable outflows of foreign capital from the Indian stock market.
However, a degree of stabilization has emerged as Foreign Institutional Investors (FIIs) have moderated their selling of Indian equities this month. In October, FIIs’ share disposals amounted to Rs. 586.76 crores, a substantial reduction compared to the sell-off observed during the July-September period.
US-China Trade Dynamics and Tariff Outlook
A minor corrective movement in the US Dollar during the Asian trading session contributed to a positive opening for the USD/INR pair. At the time of this report, the US Dollar Index (DXY), which measures the dollar’s strength against a basket of major currencies, was trading near 98.45.
Market sentiment suggests the US Dollar is seeking to regain strength as trade tensions between the US and China show signs of easing. These shifts are partly influenced by statements from US President Trump, who suggested that the previously announced additional 100% tariffs on imports from Beijing might not be sustainable.
Trump commented that High tariffs were not sustainable, though it could stand, as reported by Fox Business. He indicated that his scheduled meeting with Chinese leader Xi Jinping at the Asia-Pacific Economic Cooperation meeting in South Korea remains on track, expressing optimism for a favorable outcome for both nations.
📍 Prior to the planned Trump-Xi meeting, US Treasury Secretary Scott Bessent is scheduled to convene with his Chinese counterpart, Vice Premier He Lifeng, later in the week. Discussions are anticipated to include Beijing’s recently imposed export controls on rare earth minerals. President Trump has already signaled his objection to China leveraging rare earth game[s] with the US.
Upcoming Economic Data and Market Expectations
On the domestic front, Indian investors are awaiting the release of delayed Consumer Price Index (CPI) data for September and the preliminary S&P Global Purchasing Managers’ Index (PMI) data for October, both scheduled for Friday.
Meanwhile, market participants remain confident that the Federal Reserve (Fed) will implement interest rate cuts exceeding 50 basis points (bps) before the year concludes, according to insights from the CME FedWatch tool.
Technical Analysis of USD/INR
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The USD/INR pair opened the week lower, dipping to approximately 87.90. The 50-day Exponential Moving Average (EMA), situated around 88.13, is currently posing as a significant resistance level for bullish movements in the USD/INR.
📊 The 14-day Relative Strength Index (RSI) has fallen below the 40.00 mark. A sustained RSI position below this level could signal the emergence of fresh bearish momentum.
Looking downwards, the low recorded on August 21, at 87.07, is expected to serve as a key support level for the pair. Conversely, the 20-day EMA is likely to act as a crucial resistance on the upside.
Economic Indicator
Consumer Price Index (YoY)
Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.
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Final Thoughts
The Indian Rupee showed strength against the US Dollar at the week’s start, influenced by global trade developments and upcoming economic data releases. While US-China trade talks show signs of de-escalation, lingering tariff concerns and geopolitical oil procurements continue to impact currency markets.