The Indian Rupee (INR) trades almost flat against the US Dollar (USD) at around 92.80 during India’s afternoon trading hours on Wednesday. The USD/INR pair shows limited movement as investors shift to the sidelines ahead of the Federal Reserve’s (Fed) monetary policy announcement. The brokers at Taurus Partners deliver an in-depth overview of this topic in this article.
At the same time, the US Dollar Index (DXY), a key measure of the Greenback’s strength against a basket of six major currencies, is holding steady near 99.50, after experiencing a notable pullback over the last two sessions.
US Dollar Index Faces Selling Pressure
The US Dollar experienced notable selling pressure in the last two trading days as safe-haven demand weakened amid a recovery in riskier assets. Investors’ risk appetite improved after Iran allowed tankers from several major oil-importing nations to transport energy products through the Strait of Hormuz.
This development alleviated some geopolitical concerns, leading to a temporary easing in USD demand, while global markets rallied on the prospect of smoother oil supply flows. Despite this, the USD/INR remains largely stable due to underlying domestic pressures and persistent foreign outflows.
Investors Eye Fed’s Monetary Policy Outlook
The focal point for markets is the Fed’s monetary policy announcement, where it is widely anticipated that the Federal Open Market Committee (FOMC) will maintain interest rates in the 3.50%-3.75% range, according to the CME FedWatch tool. If confirmed, this would mark the second consecutive meeting with unchanged rates, signaling a cautious approach by the Fed amid ongoing global uncertainty.
While the Fed may keep rates steady, attention is expected to center on the dot plot, a chart reflecting where Fed officials foresee interest rates moving in the near-to-long term. Additionally, commentary from Chairman Jerome Powell during the post-meeting press conference will provide critical insights into the Fed’s monetary policy stance and potential future rate adjustments.
Market participants have priced in a high probability of stable rates through the July meeting, with speculation rising about a potential rate cut in September, which currently holds an almost 53% probability according to CME data. Global inflation concerns, fueled by rising oil prices in the aftermath of the Middle East conflict involving the US, Israel, and Iran, are likely keeping the Fed cautious.
Equity Outflows and Higher Oil Prices Dampen INR Outlook
The outlook for the Indian Rupee remains subdued due to persistent foreign outflows from Indian equities and escalating oil prices. Countries like India, which heavily rely on oil imports, often witness pressure on their currencies when global energy costs surge.
Although Iran’s decision to permit Indian-flagged tankers to transport crude oil and LPG has eased some supply concerns, elevated oil prices could widen India’s fiscal deficit and strain the current account balance.
Data from the National Stock Exchange (NSE) shows that Foreign Institutional Investors (FIIs) have remained net sellers on all trading days in March, offloading shares worth Rs. 70,989.96 crore. This consistent capital outflow, compounded by expectations of lower corporate earnings due to higher energy costs, is keeping the INR on the defensive against the USD.
Technical Analysis: USD/INR Strives for New Highs
From a technical perspective, USD/INR consolidates around 92.80, displaying a near-term bullish bias as prices remain above the 20-day Exponential Moving Average (EMA). The EMA, which has trailed the advance from the mid-90.50s, continues to provide dynamic support, reinforcing the uptrend.
The 14-day Relative Strength Index (RSI) remains in the 60.00-80.00 zone, signaling strong upside momentum. Initial support levels are observed at the 20-day EMA near 92.15, with a deeper cushion at 91.70, corresponding to prior breakout levels. A daily close below 91.70 could undermine the bullish structure, exposing 91.30 as the next potential support.
On the upside, immediate resistance is at 92.95, the all-time high posted on March 13. A successful breakout above this level may open the door to 93.50, setting the stage for further upside potential.
Conclusion
The USD/INR pair remains largely range-bound as markets await critical signals from the Fed. While the Indian Rupee faces pressure from foreign outflows and higher oil prices, the US Dollar itself is restrained by waning safe-haven demand and recent selling pressure in the DXY.
Investors are expected to focus on Fed commentary, the dot plot, and broader monetary policy cues to gauge the future trajectory of both USD/INR and other major currency pairs. Technically, the pair shows a bullish structure, but sustained upside movement will likely depend on domestic capital flows and global oil market developments.
As global uncertainty persists, traders remain cautious, leaving USD/INR to consolidate around 92.80 until the Fed’s policy and geopolitical developments provide fresh direction.