USD/INR strengthens ahead of US PPI release
- Feb 13
- 3 min read
- The Indian Rupee (INR) declined during Thursday’s Asian trading session.
- A stronger US Dollar and outflows from Indian equity markets contributed to the INR's weakness.
- Investors are closely monitoring Indian PM Modi’s meeting with officials from the Trump administration.
- Market participants are also awaiting the release of US Producer Price Index (PPI) data for further cues.
"Indian Rupee Weakens Amid USD Demand and Oil Price Volatility; Modi’s US Visit in Focus"
The Indian Rupee (INR) weakened on Thursday, pressured by renewed demand for the US Dollar (USD). Additional factors contributing to the INR's decline included the maturity of positions in the non-deliverable forwards (NDF) segment and equity sales by overseas investors. However, strong intervention from the Reserve Bank of India (RBI) could help limit the local currency’s losses. Meanwhile, a drop in crude oil prices, following US President Donald Trump’s calls to Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskiy to discuss ending the war in Ukraine, may provide some support to the INR. As the world’s third-largest consumer of crude oil, India benefits from lower oil prices, which could ease pressure on the currency.
Indian Prime Minister Narendra Modi is scheduled to meet with several Trump administration officials during his visit to Washington, D.C., including Elon Musk, who leads Trump’s Department of Government Efficiency. Modi’s meeting with Musk is anticipated to include discussions on Musk’s private business ventures, such as the expansion of Starlink and Tesla in India. These talks could have implications for India’s technology and automotive sectors. On the US economic front, market participants are closely watching the release of key data, including the weekly Initial Jobless Claims and the Producer Price Index (PPI), which are set to be published later on Thursday. These figures could influence market sentiment and the USD/INR exchange rate.
Indian Rupee remains weak amid multiple challenges
According to Reuters, citing government officials, Modi is prepared to cut India's tariffs in multiple sectors ahead of his meeting with Trump in order to prevent a potential trade war with the United States.
India’s retail inflation, measured by the Consumer Price Index (CPI) stood at 4.31% in January from 5.22% in December, the Ministry of Statistics & Programme Implementation showed on Monday. This reading came in softer than the market consensus of 4.6%.
The US CPI rose 3.0% year-on-year in January versus 2.9% prior, according to the US Bureau of Labor Statistics on Wednesday. This reading came in hotter than the 2.9% expected.
The so-called core CPI, which excludes food and energy costs, climbed 3.3% in January, compared to the previous reading of 3.2% and the estimation of 3.1%.
On a monthly basis, the headline CPI inflation jumped to 0.5% in January from 0.4% in December, while the core CPI increased to 0.4% in January from 0.2% recorded in December.
Traders expected just one quarter-point rate cut this year, down from two reductions before the CPI report.
Fed Chair Jerome Powell said the recent inflation data showed that while the central bank has made substantial progress toward taming inflation, there is still more work to do.
USD/INR forms a shooting star candlestick, downward pressure expected in the near term
The Indian Rupee edges lower on the day. Technically, the constructive outlook of the USD/INR pair remains intact, with the price holding above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. The path of least resistance is to the upside as the 14-day Relative Strength Index (RSI) stands above the midline near 56.00. The 87.00 psychological level acts as the first upside barrier for USD/INR. A decisive break above this level could see a rally to an all-time high near 88.00. Extended gains could pave the way to 88.50. On the other hand, the first downside target to watch is 86.35, the low of February. Bearish candlesticks below the mentioned level could push USD/INR back down toward 86.14, the low of January 27.
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