Summary:
USD/INR rises as foreign investors pull out and trade talks stall. Rupee under pressure with resistance near ₹87 amid Fed and tariff uncertainties.
The US Dollar to Indian Rupee (USD/INR) exchange rate surged to a near four-week high around ₹86.50 on Tuesday, continuing its upward momentum for a fourth consecutive session. This renewed pressure on the rupee comes amid sustained foreign institutional investor (FII) outflows and an ongoing delay in concluding a trade agreement between the United States and India.
Market sentiment around the Indian currency remains cautious as investors respond to both external trade dynamics and domestic monetary expectations. With the rupee starting the week on a weaker note and the dollar stabilising after recent gains, the near-term outlook favours continued rupee depreciation.
One of the most significant drivers behind the rupee's recent slide is the substantial exit of foreign capital from Indian equity markets. In July alone, FIIs have withdrawn over ₹18.636 crore worth of shares, reflecting growing caution over India's trade prospects and global economic risks.
This capital flight not only undermines market confidence but also increases the demand for dollars, especially as domestic entities look to hedge or settle foreign liabilities. The result is sustained upward pressure on the USD/INR exchange rate.
Further complicating the picture is the lack of progress in US-India trade negotiations. Despite recent rounds of talks in Washington, the two sides have yet to finalise an interim free trade agreement (FTA). The visiting Indian delegation, led by Rajesh Agrawal, returned without a breakthrough, and the next round of discussions is only expected by mid-August.
Until an agreement is signed, Indian exports to the US continue to face sector-specific tariffs. Investors view this delay as a negative signal, which, in turn, reinforces their reluctance to maintain exposure to Indian assets.
On the global front, the US Federal Reserve is widely expected to maintain interest rates between 4.25% and 4.50% during its upcoming policy meeting. Recent inflation data and resilient economic indicators have prompted traders to scale back bets on immediate rate cuts.
The broader US dollar index (DXY) remains supported just below the 98.00 mark, maintaining its strength against emerging market currencies like the Indian rupee. With the dollar acting as a safe haven amidst uncertain trade outcomes and geopolitical tensions, the greenback remains well-bid, further driving USD/INR higher.
From a technical perspective, the USD/INR pair remains bullish, comfortably trading above its 20-day exponential moving average (EMA), currently around ₹86.07. The 14-day relative strength index (RSI) has climbed towards the 60 mark, suggesting further upside potential if this level is breached.
Immediate resistance lies at the June 23rd high near ₹87.00. while support is seen at the 50-day EMA close to ₹85.85. As long as the currency pair holds above its short-term moving averages, momentum is likely to remain in favour of the dollar.
Several key events could influence the next move in the US Dollar to Indian Rupee pair:
| Event | Date | Likely Impact |
| India & US flash PMI data | 25-July | Market volatility based on economic strength |
| Fed policy decision | 30-July | Rate guidance to influence dollar strength |
| US-India trade update | Ongoing | Delays may continue to pressure INR |
| FII flow trend | Daily | Persistent outflows to keep INR under stress |
Investors will monitor upcoming PMI data releases, Fed statements, and progress on trade discussions for signs of reversal or continuation in trend.
The outlook for the US Dollar to Indian Rupee remains tilted in favour of the dollar, as risk-off sentiment, capital outflows from India, and a resilient greenback continue to weigh on the rupee. Unless India makes tangible progress on trade negotiations or attracts renewed foreign investment, the USD/INR pair may well test resistance near ₹87.00 in the coming days.
Traders should stay alert to global monetary cues and domestic economic data, as these will likely shape currency movements through the end of July and beyond.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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