Tag: EmergingMarkets

Mexican Peso remains firm against the Greenback with USD/MXN below 19.20
- The Mexican Peso extends its gains against the US Dollar as markets adopt a ‘risk-on’ sentiment following the easing of US-China tensions.
- USD/MXN remains in a short-term bearish trend below 19.20.
- US-Mexico tensions remain in focus next week as Mexico condemns 50% tariffs on steel and aluminium imports to the US.
The Mexican Peso (MXN) is experiencing its third consecutive day of gains against the US Dollar (USD) on Friday, pushing the USD/MXN exchange rate to its lowest level in eight months.

With the emerging market pair trading near the October low of 19.11, bearish momentum of the short-term trend continues to hold. The pair momentarily traded at 19.09, its lowest level since mid-September.

Throughout the week, escalating trade tensions and a weaker USD have underpinned MXN strength. However, Thursday’s diplomatic developments and Friday’s better-than-expected US employment data have added complexity to the broader narrative.

The latest move in USD/MXN reflects a combination of strong domestic fundamentals in Mexico, including rising consumer confidence and resilient exports, alongside global risk appetite and fading expectations of an imminent Federal Reserve (Fed) rate cut. The pair remains vulnerable to further downside if tariff tensions escalate or if the Mexican government fails to secure an exemption from the recently imposed US steel and aluminum tariffs.

Mexican Peso daily digest: USD/MXN weighs tariffs, growth outlook, and consumer confidence
- Mexico’s Economy Minister Marcelo Ebrard is in Washington to meet with US officials and request an exemption from the recently imposed 50% tariffs on steel and aluminum imports. The Mexican government is pushing hard to protect its industries and jobs, and if no exemption is granted, it plans to announce its response next week.
- Friday’s US Nonfarm Payrolls (NFP) report for May surprised to the upside. The US economy added 139,000 new jobs, beating analysts’ expectations of a 130,000 increase. Meanwhile, the Unemployment Rate remained unchanged at 4.2%.
- The stronger-than-expected headline figure has provided temporary relief for the Dollar, easing concerns that the Federal Reserve may need to act quickly with rate cuts.
- According to the CME FedWatch Tool, the probability of a July rate cut has dropped sharply to 16.5%, down from 33.9% prior to the release. The data has temporarily eased pressure on the Fed to act swiftly, suggesting that policymakers may adopt a more patient stance in the near term.
- On Thursday, Mexico’s Consumer Confidence data for May was released, showing a figure of 46.5, an increase from 45.5 in April. On Thursday, Reuters reported that the Canadian Prime Minister called US tariffs “illegal,” while Mexico and the European Union expressed similar frustration.
- On Wednesday, Mexican President Claudia Sheinbaum called the new tariffs “unjust, unsustainable, and without legal grounds,” warning that if a deal is not reached, Mexico will be forced to respond with retaliatory measures. Canada and the EU have also threatened to retaliate if no progress is made in trade talks.
USD/MXN technical analysis: Bearish trend remains strong below 19.20

Price action on the USD/MXN daily chart continues to reinforce the broader bearish structure. With prices currently trading around the October low of 19.11, the psychological level of 19.20 is providing an important barrier of resistance for the short-term move.

At the time of writing, prices remain below both the 10-day Simple Moving Average (SMA) at 19.26 and the 20-day SMA at 19.33. The 78.6% Fibonacci retracement level at 19.57, derived from the broader October–February rally, now acts as a key resistance level, further capping any recovery attempts.

The Relative Strength Index (RSI) near 36 signals bearish momentum, although the indicator has yet to reach oversold conditions, suggesting potential for further downside.

USD/MXN daily chart

From here, the bearish scenario would involve a decisive break below the October low of 19.11, which could see prices retest the September low of 19.07, opening the door for bearish continuation toward 19.00

On the other hand, the bullish scenario would require a sustained recovery above 19.28 (10-day SMA) and 19.34 (20-day SMA), followed by a breakout above the 19.60 resistance, which aligns with the 23.6% retracement of the same October–February move.

Mexican Peso FAQs

The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.

The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.

Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.

As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
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June 6, 2025
Mexican Peso reaches new YTD highs as US Dollar weakens
- USD/MXN trades below 19.20 after testing a new YTD low at 19.16.
- US ADP Employment and ISM Services PMI data missed forecasts.
- Mexico responds to increased tariffs on steel and aluminum imports to the US.
The Mexican Peso (MXN) is trading near a fresh year-to-date high against the US Dollar (USD) on Wednesday, which is providing support for the USD/MXN pair above 19.16.

As economic data released from the United States (US) highlighted signs of economic fragility, trade tensions between the US and its global trading partners continue to rise.

With tariffs on aluminium and steel imports to the US rising to 50% on Wednesday, Mexico’s Economy Minister, Marcelo Ebrard, announced that Mexico will be requesting an exemption from the tariffs on Friday.

In a morning conference, Mexican President Claudia Sheinbaum announced that the increase was an “unfair measure”. The President also stated that Mexico will announce countermeasures against the US if no deal is reached by next week.

“It is not a matter of revenge, or retaliation as they call it in English,” she said. “It is a matter of protecting our jobs and our businesses,” added Sheinbaum.

Meanwhile, other nations, such as Japan and Canada, are expressing similar concerns and frustrations in response to Trump’s tariff policies, which have been driving demand away from the US Dollar and into alternative assets.

On Thursday, Mexico will release Consumer Confidence data for May. With April’s reading of 45.5 serving as the benchmark, any upside or downside surprises could further influence the direction of the Mexican Peso.

For the US, Weekly Jobless claims data will be released at 12:30 GMT, shedding light on the employment situation in the US before Friday’s release of the May Nonfarm Payrolls (NFP) report.

Mexican Peso daily digest: US employment data remains in focus
- On Wednesday, US ADP Employment data indicated that the US private sector added 37,000 jobs in May, missing analyst forecasts of a 115,000 increase.
- The Institute of Supply Management released the latest report for May, which reflected a weakening in business conditions in the US service sector.
- With analysts expecting the ISM Services figures to rise to 52, a reading of 49.9 is reflective of a potential weakening in the perceived business conditions of the service sector, which is the largest contributor of Gross Domestic Product (GDP) in the US.
- On Thursday, Initial Jobless Claims are forecast at 235,000, down from last week’s 240,000 print.
- Focus remains on Friday’s NFP figures, which are expected to show that 130,000 new jobs were added to the US economy in May, down from 177,000 in April.
- Meanwhile, the unemployment rate is expected to remain at 4.2%, reflecting a resilient US labour market.
- According to the CME FedWatch Tool, market participants are currently pricing in a 56% chance of a 25 bps rate cut in September. For June and July meetings, the expectation is that the Fed will maintain its benchmark rate at the current range of 4.25%-4.50%.
- On Thursday, Mexico’s Consumer Confidence data for May will provide insight into how individuals and consumers in Mexico perceive the economy’s resilience in the face of current economic risks, as well as their expectations for near-term growth prospects.
Mexican Peso technical analysis: USD/MXN bears regain control

USD/MXN is trading below the 19.20 psychological level, providing near-term resistance for the pair. With the 10-day Simple Moving Average (SMA) firming at 19.29, a move above could see a retest of the 19.30 psychological level.

USD/MXN daily chart

The 20-day SMA stands at 19.36, a break of which may enable bulls to continue driving prices toward the next major level of technical resistance, the April low at 19.47.

On the downside, a break below the May low of 19.18 could reassert bearish momentum, potentially pushing prices down toward Wednesday’s low near 19.16. Below that is the October low of 19.11, providing the potential for the 19.00 psychological level.

Mexican Peso FAQs

The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.

The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.

Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.

As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
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June 4, 2025
USD/INR trades flat amid a softer US Dollar
- The Indian Rupee steadies in Tuesday’s Asian session.
- A weaker US Dollar and stronger Chinese Yuan could support the INR, but RBI rate cut bets might cap its upside.
- The US Conference Board’s Consumer Confidence report is due later on Tuesday.
The Indian Rupee (INR) flat lines on Tuesday after hitting a two-week high in the previous session. A broader gain in the Asian currencies on account of a weak US Dollar (USD) could provide some support to the Indian currency. Additionally, a decline in crude oil prices might contribute to the INR’s upside. 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.

Nonetheless, expectations of lower interest rates by the Reserve Bank of India (RBI) might weigh on the local currency. Traders brace for the US Conference Board’s Consumer Confidence report, which is due later on Tuesday. Also, Durable Goods Orders and the Dallas Fed Manufacturing Index will be released. The Minutes of the Federal Open Market Committee (FOMC) will be the highlight later on Wednesday.

Indian Rupee holds steady amid weakening of the US Dollar
- “It’s a very EM positive environment, and I don’t see any reason why that will stop in the near term,” said Brad Bechtel, global head of foreign exchange at Jefferies. Bechtel emphasized that the US Dollar (USD) could face steeper losses if China allows the Yuan to start moving substantially higher.
- The Monetary Policy Committee (MPC) of the RBI is likely to cut the repo rate by 25 basis points (bps) at the June meeting, according to Moneycontrol’s poll of economists and bank treasury heads.
- NITI Aayog Chief Executive Officer (CEO) BVR Subrahmanyam said that India has surpassed Japan to become the world’s fourth-largest economy, citing data from the International Monetary Fund (IMF).
- According to the CME FedWatch tool, the chances of an interest rate cut by the Federal Reserve (Fed) in June’s meeting are only at a low of 5.6%.
USD/INR retains the negative bias in the longer term

The Indian Rupee trades on a flat note on the day. The bearish outlook of the USD/INR pair remains in place as the price is below the key 100-day Exponential Moving Average (EMA) on the daily chart. Furthermore, downward momentum is reinforced by the 14-day Relative Strength Index (RSI), which stands below the midline near 45.00. This suggests that further downside looks favorable in the near term.

The first support level for USD/INR is located at 84.78, the low of May 26. Any follow-through selling below this level could set off a drop to 84.61, the low of May 12. The additional downside filter to watch is 84.05, the lower limit of the trend channel.

In the bullish case, the 100-day EMA at 85.55 acts as an immediate resistance level for the pair. Sustained trading above the mentioned level possibly lifts USD/INR up to 85.75, the upper boundary of the trend channel. Further north, the next hurdle is seen at 85.10, the high of May 22.

Indian Rupee FAQs

The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.

The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.

Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.

Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.
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May 27, 2025
Mexican Peso benefits from a weaker Greenback on Memorial Day
- The Mexican Peso holds gains as US Dollar pressure builds.
- US bond markets reopen on Tuesday, contributing to the pair’s next move.
- USD/MXN remains in a downtrend with immediate resistance at 19.30.
The Mexican Peso (MXN) is experiencing a steady appreciation against the US Dollar (USD) on Monday, reflecting lingering uncertainty in the United States (US) economic outlook amid concerns about US President Donald Trump’s tariff threats and the country’s fiscal outlook.

With US markets closed for Memorial Day on Monday, the Mexican Peso remains resilient, with the USD/MXN pair trading at around 19.22, down 0.18%, at the time of writing.

As participants keep an eye on US Treasury yields and remarks from US policymakers, they should be aware of the limited liquidity in the US market due to the holiday weekend.

On this week’s economic agenda, the fate of the USD/MXN will likely remain at the mercy of the Greenback and insights provided by the Fed meeting minutes on Wednesday.

Market participants are particularly focused on the release of the Fed’s preferred inflation measure, the US core Personal Consumption Expenditures (PCE) data for April, as well as the University of Michigan consumer sentiment data, which are scheduled for Friday.

These data points are crucial for understanding inflation and consumer sentiment trends, and gauging how US citizens feel about the current economic situation, both of which are important factors that may influence expectations regarding when the Federal Reserve (Fed) might consider cutting interest rates.

Mexican Peso daily digest: USD/MXN faces pressure due to renewed US Dollar weakness
- The US credit rating downgrade, rising expectations of increased US debt levels, and a sell-off in the bond market have placed the resilience of the USD under significant scrutiny.
- The USD struggles to gain ground as investors digest US President Donald Trump’s decision to extend EU tariffs until July 9. The announcement on Monday cheered risk markets, as traders see it as an opportunity for negotiations between the two significant economies.
- On Friday, Trump had threatened to impose 50% tariffs on European Union imports and 25% tariffs on Apple and Samsung smartphones, rattling markets.
- The persistent threats of tariffs from President Trump directed at international counterparts are undermining investor confidence, thereby challenging the USD’s status as the preferred reserve currency.
- On Tuesday, US Consumer Confidence data, which gauges Americans’ views about the economy and finances, will be released.
- Wednesday’s agenda will see the publication of the minutes from the May Federal Open Market Committee (FOMC) meeting, offering insights into interest rate discussions, alongside public statements from Fed members providing additional context for future monetary policy.
Mexican Peso technical analysis: USD/MXN pressures support with October low in focus

USD/MXN remains entrenched in a firm downtrend, hitting a new year-to-date low just below 19.20 at the time of writing.

Price action continues to hover below both the 10-day and 20-day Simple Moving Averages (SMA), which act as dynamic resistances at 19.34 and 19.47, respectively.

Momentum indicators remain weak, with the Relative Strength Index (RSI) parked at 35.79, suggesting that while bearish momentum, the market is not yet in oversold territory.

With downside pressure building, attention now shifts to the October low at 19.11, which serves as the next major support.

A sustained break below this level could open the door to deeper declines toward 19.00, while any rebound would first need to reclaim 19.47 to shift short-term sentiment.

USD/MXN daily chart

Central banks FAQs

Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.

A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.

A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.

Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
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May 26, 2025
USD/INR softens ahead of US Retail Sales, PPI releases
- Indian Rupee posts modest gains in Thursday’s Asian session.
- Optimism from the US-China trade deal underpins the US Dollar and drags the INR lower.
- Traders brace for the US April Retail Sales and PPI data, due later on Thursday.
The Indian Rupee (INR) strengthens on Thursday. The de-escalation of a trade war between the United States (US) and China, along with the fall in Crude oil prices and the weakness of the US Dollar (USD), provides some support to the Indian currency.

However, the cooler-than-expected India’s retail inflation, which dropped to its lowest level since July 2019, might exert some selling pressure on the INR, as it could give the Reserve Bank of India (RBI) another chance to cut rates next month in its scheduled meeting.

Looking ahead, traders await the release of top-tier US economic data due later on Thursday, including Retail Sales and Producer Price Index (PPI) for April. The Federal Reserve (Fed) Chair Jerome Powell is scheduled to speak later on the same day.

Indian Rupee remains firm despite softer retail inflation report
- India’s Wholesale Price Inflation (WPI) fell to a 13-month low of 0.85% in April from 2.05% in March, according to the Commerce and Industry Ministry on Wednesday. This figure came in below the market consensus of 1.76%.
- “Positive rate of inflation in April, 2025 is primarily due to an increase in prices of manufacture of food products, other manufacturing, chemicals and chemical products, manufacture of other transport equipment, and manufacture of machinery and equipment, etc,” noted the Industry Ministry.
- San Francisco Fed President Mary Daly said late Wednesday that the strength of the US economy allows policymakers to be patient as they wait for more evidence of how Trump’s policies will affect businesses and households.
- Markets have dialed back expectations for rate cuts from the Fed this year, pricing in a 74% chance of the first cut of at least 25 basis points (bps) at the September meeting, according to LSEG data, compared with the prior view for a cut in July.
USD/INR retains a bearish bias in the longer term

The Indian Rupee trades stronger on the day. The bearish tone of the USD/INR pair remains in place, with the price holding below the key 100-day Exponential Moving Average (EMA) on the daily chart. Nonetheless, further consolidation or temporary recovery cannot be ruled out as the 14-day Relative Strength Index (RSI) hovers around the midline, indicating neutral momentum in the near term.

The first downside target for USD/INR is seen at 84.95, the low of April 28. Any follow-through selling below the mentioned level could see a slide toward 84.61, the low of May 12. The next contention level to watch is 84.12, the low of May 5.

On the other hand, the immediate resistance level for the pair is located at 85.60, the 100-day EMA. A break above this level might even spark a run toward the 86.00-86.05 zone, which marks both a round figure and the upper boundary of the trend channel.

Indian Rupee FAQs

The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.

The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.

Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.

Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.
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May 15, 2025
USD/INR flat lines as India-Pakistan tensions rise in Kashmir
- Indian Rupee steadies in Monday’s Asian session.
- Concerns over geopolitical tensions between India and Pakistan weigh on the Indian Rupee.
- Rising foreign inflows and lower crude oil prices might help limit the INR’s losses.
The Indian Rupee (INR) holds steady on Monday. Rising tension with Pakistan could trigger a risk-off sentiment among traders, which might drag the Indian currency lower. The ceasefire violation along the Line of Control (LoC) came days after the Pahalgam terror attack, which killed 26 people, mostly tourists, in the Baisaran valley near Pahalgam, Jammu and Kashmir.

On the other hand, Foreign Portfolio Investors (FPIs) continued to buy Indian equities for the seventh consecutive day. This, in turn, might boost the local currency against the Greenback in the near term. Furthermore, the decline in Crude oil prices might contribute to the INR’s upside, as India is the third largest consumer of crude oil in the world.

The US Dallas Fed Manufacturing Business Index for April will be published later on Monday. The preliminary reading of US Gross Domestic Product (GDP) for the first quarter (Q1) will be in the spotlight on Wednesday ahead of the US Nonfarm Payrolls (NFP) report, which is due later on Friday.

Indian Rupee trades flat amid India-Pakistan tensions
- Tensions between India and Pakistan are rising after Pakistan violated a ceasefire across the LoC after the Pahalgam terror attack. On Thursday night, hours after suspending the Simla Agreement of 1971, the Pakistan Army breached the truce along the LoC and began firing at various sites. The Indian Army has responded “effectively.”
- The Reserve Bank of India is expected to cut the Repo Rate to 5.50% by end-Q3 (vs. 5.75% in March poll), according to the Reuters poll.
- US Agriculture Secretary Brooke Rollins said on Sunday that the Trump administration is having daily conversations with China over tariffs, per Reuters. Rollins added that there were ongoing talks between the two nations and that trade deals with other nations were “very close.”
  US President Donald Trump said on Friday that the US will be reasonable on tariffs, adding that markets are adjusting to tariff policy.
- The University of Michigan (UoM) Consumer Sentiment in April rose to 52.2 from 50.8 in the previous reading, better than the estimation of 50.8. Consumers’ inflation expectations for one year eased to 6.5% in April versus 6.7% prior.
USD/INR’s outlook remains bearish under the 100-day EMA

The Indian Rupee trades flat on the day. The negative outlook of the USD/INR pair remains intact, characterized by the price holding below the key 100-day Exponential Moving Average (EMA) on the daily chart. Additionally, the 14-day Relative Strength Index (RSI) stands below the midline near 41.00, supporting the sellers in the near term.

The lower limit of the descending trend channel at 84.80 acts as an initial support level for USD/INR. Extended losses could see a drop to 84.22, the low of November 25, 2024. Further south, the additional downside filter to watch is 84.08, the low of November 6, 2024.

In the bullish case, the first upside barrier is located at 85.80, the 100-day EMA. If the pair breaks above this level, it could draw in more bullish pressure and push the pair toward 86.35, the upper boundary of the trend channel.
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April 28, 2025
Fitch affirms Mexico at ‘BBB-‘; outlook stable

Fitch Ratings gave Mexico a confidence vote, affirming that its long-term foreign currency issuer default rating (IDR) is at ‘BBB-‘ with a stable outlook.

Key highlights

Credit fundamentals: Mexico’s rating is supported by a prudent macroeconomic policy framework, robust external finances, and its large and diversified economy. The rating is constrained by muted long-term growth, weak governance indicators, fiscal challenges related to a low revenue base and budgetary rigidities, and contingent liabilities from Pemex.

Stable outlook: The stable outlook reflects Fitch’s view that Mexico’s rating has headroom to withstand the tougher economic environment implicit in our new baseline. An economic slowdown already underway is likely to worsen amid an aggressive turn toward trade protectionism in the US under the Trump administration. However, we currently expect these developments will reinforce the muted growth already captured in the rating, but not worsen it in a major and lasting manner. We expect the administration of President Sheinbaum will keep its fiscal consolidation goals broadly on track despite this difficult backdrop.

Elevated Tariff Uncertainty: Mexico is especially vulnerable to US trade protectionism, as decades of integration have made exports to its northern neighbor a mainstay of the economy (27% of GDP in 2024). Tariffs already imposed could have significant impacts, especially in the auto sector, and the uncertainty is weighing on activity. These developments remain fluid, and the fate of the trade relationship is likely to remain unclear at least until a review of the USMCA agreement scheduled for mid-2026. Even if US tariff policy preserves a preferential treatment for Mexico relative to competitors, we see dimmer prospects for “nearshoring” so long as this uncertainty persists.

Economic Contraction In 2025: Real GDP growth slowed to 1.5% in 2024, ending the year on a weak note (-0.6% qoq seasonally adjusted in 4Q24) due to a falloff in public investment and elevated uncertainty. We expect a 0.4% contraction this year as tariffs, tariff-induced uncertainty, fiscal adjustments, and a slowdown in the U.S. weigh on activity. Risks are tilted to the downside, and counter-cyclical policy scope is limited.

USD/MXN Reaction to Fitch’s ratings headline

USD/MXN continues to trade lower, below the 20.00 psychological figure, with the Mexican Peso appreciating sharply. On further weakness, the exotic pair might test the 200-day Simple Moving Average (SMA) at 19.86, followed by the 19.50 figure. Otherwise, buyers could drive the pair towards the 20.00 psychological figure.

Mexican Peso FAQs

The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.

The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.

Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.

As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.

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April 16, 2025
USD/INR softens ahead of US Retail Sales release, Fed’s Powell speech
- The Indian Rupee gathers strength in Wednesday’s Asian session.
- The softer US Dollar and lower crude oil prices continue to underpin the INR.
- The US March Retail Sales report and speech by Fed Chair Powell will be the highlights later on Wednesday.
The Indian Rupee (INR) trades in positive territory for the fifth consecutive day on Wednesday. The weakening of the US Dollar (USD) and the extended decline in crude oil prices eased 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 Indian currency value.

On the other hand, US President Donald Trump said on Monday that he was considering temporary exemptions to tariffs on imported vehicles and parts to allow automakers additional time to establish manufacturing operations in the US. Nonetheless, tensions between the US and China are escalating, which might weigh on the Asian currencies, including the INR.

Looking ahead, investors will keep an eye on the US March Retail Sales later on Wednesday, which is expected to rise 1.3% MoM in March. Also, the speech of Federal Reserve (Fed) Chair Jerome Powell will be in the spotlight.

Indian Rupee drifts higher on a weaker US Dollar
- Indian stocks climbed as trading resumed after an extended weekend, with the benchmark indices recovering all losses sparked by Trump’s reciprocal tariffs earlier this month. The nation’s big domestic economy is seen able to withstand a potential global recession better than many peers, who face higher tariffs.
- The Reserve Bank of India (RBI) will buy bonds worth 400 billion rupees ($4.67 billion) and will also conduct a 43-day repo for 1.50 trillion rupees on Thursday, per Reuters.
- India’s Consumer Price Index (CPI) rose by 3.34% YoY in March, compared to 3.61% in February, according to the Ministry of Statistics and Programme Implementation. This reading came in softer than the 3.60% expected.
- Fed Governor Christopher Waller said on Monday that the Trump administration’s tariff policies were a major shock to the US economy that could lead the central bank to cut rates to head off recession even if inflation remained high.
- Atlanta Fed Bank President Raphael Bostic said that the uncertainty surrounding the Trump administration’s tariff and other policies has put the economy into a “big pause,” and he suggested that the Fed bank should stay on hold until there is more clarity.
- The markets are now pricing in nearly 85 basis points (bps) worth of monetary policy easing by the end of the year, with most expecting the Fed to hold rates next month, according to the CME FedWatch tool.
USD/INR resumes its downside journey below the 100-day EMA

The Indian Rupee trades stronger on the day. The USD/INR pair resumes its downside as the pair crosses below the key 100-day Exponential Moving Average (EMA) on the daily timeframe. The downward momentum is supported by the 14-day Relative Strength Index (RSI), which stands below the midline near 42.60, indicating the longer-term bearish bias isn’t completely over yet.

The initial support level for USD/INR is located at 85.48, the low of March 24. Further south, the next contention level to watch is 85.20, the low of April 3, followed by 84.95, the low of April 3.

In the bullish case, the 85.90-86.00 zone acts as an immediate resistance level for the pair, representing the 100-day EMA and the psychological level. Bullish candlesticks and consistent trading above the mentioned level could see a rally to 86.61, the high of April 10.
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April 16, 2025
USD/INR strengthens ahead of US PCE inflation data
- The Indian Rupee softens in Friday’s Asian session.
- Month-end US Dollar demand, fears of a global trade war and higher oil prices weigh on the INR.
- The US February PCE inflation data will take center stage later on Friday.
The Indian Rupee (INR) remains weak on Friday, pressured by month-end US Dollar (USD) demand from importers. US President Donald Trump late on Wednesday announced a 25% tariff on automotive imports, set to take effect on April 2. This, in turn, lifts the Greenback and undermines the Indian currency. Rising crude oil prices also contribute to the INR’s downside as India is the world’s third-largest oil consumer.

However, positive domestic markets and foreign fund inflows might help limit the local currency’s losses. Investors will keep an eye on the US February Personal Consumption Expenditures (PCE) data, which is due later on Friday. This report could offer some hints about the trajectory for further rate cuts after the Federal Reserve’s (Fed) decision last week to hold its benchmark interest rate steady.

Indian Rupee weakens amid month-end US Dollar demand
- The Indian economy is estimated to achieve a growth of 6.5% in FY25 despite considerable external headwinds, according to the Department of Economic Affairs (DEA), Ministry of Finance.
- Trump’s threat to impose 25% tariffs on all goods entering the US from countries importing Venezuelan gas or oil, brandished on Monday, could have disastrous consequences for the Indian economy, per Le Monde.
- Trump said that tariffs will likely be more “lenient than reciprocal,” as next week’s tariff deadline looms for a number of levies to go into effect.
- The US economy expanded at an annual 2.4% pace in the final three months of 2024, the third release of the figures from the Bureau of Economic Analysis showed Thursday. This figure came in slightly better than the previous estimate of fourth-quarter growth.
USD/INR paints a negative picture under the 100-day EMA

The Indian Rupee trades in negative territory on the day. The negative view of the USD/INR pair remains in play, with the price being capped below the key 100-day Exponential Moving Average (EMA) on the daily timeframe. The downward momentum is reinforced by the 14-day Relative Strength Index (RSI), which stands below the midline near 31.0, suggesting that further downside looks favorable.

The first downside target for USD/INR is located at 85.56, the low of March 26. If bearish momentum builds below this level, it could trigger more selling and drag the pair down toward 84.84, the low of December 19, followed by 84.22, the low of November 25, 2024.

On the other hand, the crucial upside barrier to watch is in the 85.90-86.00 zone, representing the 100-day EMA and the psychological level. A strong move above the mentioned level might even pave the way for a run at 86.48, the low of February 21, en route to 87.00, the round figure.

Indian Rupee FAQs

The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.

The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.

Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.

Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.
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March 28, 2025
USD/INR edges lower ahead of Indian WPI inflation data
- The Indian Rupee gains traction in Monday’s Asian session.
- The weaker US Dollar broadly supports the INR, but higher crude oil prices might cap its gains.
- Investors brace for India’s February WPI inflation and US Retail Sales data, which are due later on Monday.
The Indian Rupee (INR) strengthens on Monday. The concerns about slowing growth in the US economy from US President Donald Trump administration’s trade policies weigh on the Greenback and provide some support to the INR. Nonetheless, the upside for the local currency might be limited amid a rise in crude oil prices. It’s worth noting that India is the world’s third-largest oil consumer and higher crude oil prices tend to have a negative impact on the INR value.

Looking ahead, India’s February Wholesale Price Index (WPI) inflation will be released later on Monday. On the US docket, Retail Sales data for February will offer cues on US consumer sentiment and whether policy uncertainty has prompted a slowdown in spending. Investors will closely watch the US Federal Reserve (Fed) interest rate decision on Wednesday, which is expected to keep interest rates unchanged. The primary focus will be on the Fed’s policy guidance.

Indian Rupee gathers strength amid multiple headwinds
- The Indian Rupee is likely to face strong resistance around 86.50 while finding support in the 87.40-50 zone, said Dilip Parmar, a foreign exchange research analyst at HDFC Securities.
- India’s economic indicators for February reflect a moderation in inflation, improved industrial output and strong corporate earnings, according to the latest SBI Ecowrap report.
- India is projected to be the world’s third-largest economy by 2028 as it becomes the world’s most sought-after consumer market and gains share in global output, driven by macro stability influenced policy and better infrastructure, said Morgan Stanley.
- The preliminary reading of the University of Michigan (UoM) Consumer Sentiment Index showed that the index reached its lowest since November 2022, falling to 57.9 from 64.7 in the previous reading. This reading came in below the market consensus of 63.1.
- The UoM five-year Consumer Inflation Expectation jumped to 3.9% in March, compared to 3.5% in February.
- Markets widely expect the Fed will stay on hold when it concludes its two-day meeting on Wednesday. The markets have priced in nearly a 75% odds of a quarter-point reduction to the policy rate by June, according to the CME FedWatch tool.
USD/INR remains capped within a symmetrical triangle

The Indian Rupee trades stronger on the day. The USD/INR pair has consolidated near the lower limit of a symmetrical triangle on the daily chart. The constructive view of the pair remains in place, with the price holding above the key 100-day Exponential Moving Average (EMA). However, further consolidation cannot be ruled out as the 14-day Relative Strength Index (RSI) stands above the midline, suggesting neutral momentum in the near term.

The immediate resistance level for USD/INR emerges at 87.24, the upper boundary of a symmetrical triangle. Sustained gain above this level could pave the way to 87.53, the high of February 28, en route to an all-time high of 88.00.

On the flip side, a decisive break below the low of March 6 and the lower limit of the triangle pattern at 86.86 could expose 86.48, the low of February 21. Further south, the additional downside filter to watch is 86.14, the low of January 27.

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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March 17, 2025
USD/INR loses traction on likely RBI intervention
- The Indian Rupee gains traction in Monday’s early European session.
- Foreign exchange intervention from the RBI might help limit the INR’s losses.
- India’s HSBC Manufacturing PMI and US ISM Manufacturing PMI will take center stage later on Monday.
The Indian Rupee (INR) gathers strength on Monday. The potential intervention from the Reserve Bank of India (RBI) could provide some support to the local currency. On the other hand, the latest tariff rounds from US President Donald Trump on Canada, Mexico, and potentially China could boost the US Dollar (USD) and exert some selling pressure on the INR. Additionally, a recovery in crude oil prices could drag the Indian Rupee lower as India is the world’s third-largest oil consumer.

Looking ahead, traders will keep an eye on India’s HSBC Manufacturing Purchasing Managers Index (PMI) for February, which will be published later on Monday. On the US docket, the ISM Manufacturing PMI will be released.

Indian Rupee rebounds despite Trump’s tariff threats
- “Markets continue to live with the uncertainty and whiplash of the multitude of tariff proposals in the pipeline,” said MUFG Bank.
- India’s real Gross Domestic Product (GDP) grew 6.2% YoY in the fourth quarter (Q4) of 2024, compared to a 5.6% growth (revised from 5.4%) recorded in the previous quarter, according to data released by the National Statistical Office (NSO) on Friday. This figure came in weaker than the 6.3% expected.
- The US Personal Consumption Expenditures (PCE) Price Index increased 0.3% in January, in line with expectations, the US Bureau of Economic Analysis showed on Friday.
- The US PCE Price Index climbed 2.5% YoY in January, compared to 2.6% in December. The core PCE Price Index, which excludes volatile food and energy prices, climbed 2.6% YoY in January, down from 2.9% in December. Both figures came in line with the market consensus.
USD/INR sticks to positive bias in the longer term

The Indian Rupee trades in negative territory. The bullish outlook of the USD/INR pair prevails, with the price being well-supported above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. Further upside looks favorable as the 14-day Relative Strength Index (RSI) is located above the midline near 63.75.

The first upside barrier for USD/INR emerges at 87.53, the high of February 28. A bullish candlestick breaking above this level could lift the pair to an all-time high near 88.00 then 88.50.

On the flip side, the initial support level for the pair is seen in the 87.05-87.00 zone, representing the low of February 27 and the round mark. A breach of the mentioned level could drag USD/INR to the next bearish targets at 86.48, the low of February 21, followed by 86.14, the low of January 27.
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March 3, 2025
USD/INR jumps as RBI rate cut bets drag Indian Rupee lower to record low
- The Indian Rupee extends its decline in Thursday’s early European session.
- Rising bets of RBI rate cuts and risk aversion continue to undermine the INR.
- The RBI interest rate decision and the US January employment report will be in the spotlight on Friday.
The Indian Rupee (INR) extends its downside on Thursday. The local currency remains under selling pressure amid the expectation that the Reserve Bank of India (RBI) might cut the interest rates on Friday. Additionally, global trade war concerns fuelled risk aversion among investors, weighing on the INR.

Nonetheless, the foreign exchange intervention by the RBI and a decline in crude oil prices might help limit the Indian Rupee’s losses. Later on Thursday, the US weekly Initial Jobless Claims, Unit Labor Costs and Nonfarm Productivity will be released. The attention will shift to the RBI interest rate decision and the US January employment data on Friday.

Indian Rupee falls as India’s new RBI Governor is set to begin rate cuts
- The RBI is likely conducting buy/sell USD-INR swaps, pushing forward premiums lower, according to traders.
- USD/INR 1-year forward implied yield retreats from the day’s high, last at 2.19%.
- Most of the economists surveyed by Bloomberg anticipate the Indian central bank to lower the benchmark repurchase rate by at least 25 basis points (bps) to 6.25% on Friday.
- HSBC India Composite PMI came in at 57.7 in January. This figure came in weaker than the previous reading and the estimation of 57.9.
- HSBC India Services PMI eased to a two-year low of 56.5 in January versus 56.8 prior, lower than expected.
- “India’s services sector lost growth momentum in January, although the PMI remained well above the 50-break-even level. The business activity and new business PMI indices eased to their lowest levels since November 2022 and November 2023, respectively,” said Pranjul Bhandari, Chief India Economist at HSBC.
- The US Services PMI eased to 52.8 in January from 54.0 (revised from 54.1) in December, according to the Institute for Supply Management (ISM) on Wednesday. This reading came in below the market consensus of 54.3.
- Fed Vice Chair Philip Jefferson said on Thursday that he is happy to keep the Fed Funds on hold at the current level, adding that he will wait to see the net effect of Trump policies.
USD/INR maintains its positive trend

The Indian Rupee trades in negative territory on the day. The bullish view of the USD/INR pair prevails, characterized by the price holding above the key 100-day Exponential Moving Average (EMA). However, further consolidation cannot be ruled out before positioning for any near-term USD/INR appreciation as the 14-day Relative Strength Index (RSI) moves beyond the 70.00 mark.

The first upside barrier for USD/INR emerges at 87.49, an all-time high. Bullish candlesticks and buying pressure above this level might attract the pair to the 88.00 psychological level.

On the other hand, the 87.05-87.00 area acts as an initial support level for the pair, representing the low of February 5 and the round mark. More bearish candles or consistent trading below the mentioned level, the bears could take control and drag USD/INR down to 86.51, the low of February 3.

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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February 6, 2025
USD/INR holds steady as Trump threatens China with tariffs
- The Indian Rupee trades flat in Wednesday’s Asian session.
- Renewed USD demand and Trump’s tariff announcements might weigh on the INR.
- The routine RBI intervention and lower crude oil prices might cap the downside for local currency.
The Indian Rupee (INR) flat lines on Wednesday. The persistent US Dollar (USD) buying from foreign portfolio investors and local oil companies could weigh on the lNR. Additionally, US President Donald Trump’s plan to impose tariffs on China might exert some selling pressure on Asian peers, including the Indian Rupee.

Nonetheless, the downside for the INR might be limited as the Reserve Bank of India (RBI) could intervene in the foreign exchange market via USD sales to prevent the local currency from significant depreciation. A decline in crude oil prices might also help limit the INR’s losses as India is the world’s third-largest oil consumer. Investors will closely monitor the preliminary reading of HSBC India’s Purchasing Managers Index (PMI) and US S&P PMI data for January, which will be published later on Friday.

Indian Rupee looks fragile amid multiple headwinds
- India’s GDP is estimated to grow at 6.5-6.8% in the current fiscal year, according to Deloitte India on Tuesday.
- Moody’s lowered India’s economic growth forecast to 7.0% for the fiscal year ending March 2025, down from 8.2% recorded in the previous fiscal year.
- Overseas investors have sold a net total of about $6.5 billion worth of local equities and bonds in January, the largest monthly outflow since October 2023.
- Trump stated on Tuesday that his administration is discussing imposing a 10% tariff on goods imported from China on February 1 because fentanyl is being sent from China to Mexico and Canada, per Reuters.
USD/INR price action remains constructive in the longer term

The Indian Rupee trades on a flat note on the day. The path of least resistance is to the upside as the USD/INR pair has formed higher highs and higher lows while holding above the key 100-day Exponential Moving Average (EMA) on the daily chart. Additionally, the 14-day Relative Strength Index (RSI) is located above the midline near 67.00, indicating bullish momentum in the near term.

The all-time high of 86.69 appears to be a tough nut to crack for bulls. A sustained break above the mentioned level could open the door for a rally toward the 87.00 psychological level.

On the flip side, a move back below 86.18, the low of January 20, could clear the way for a dip to the next support level at 85.85, the low of January 10. The next downside target to watch is 85.65, the low of January 7.

Indian Rupee FAQs

The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.

The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.

Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.

Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.
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January 22, 2025