The Indian Rupee (INR) opened lower on Thursday, losing ground against the US Dollar (USD) ahead of the Consumer Price Index (CPI) inflation report for May. The USD/INR pair rose to 85.53 during the early European session, reflecting cautious sentiment as markets await critical macroeconomic data from both India and the US.
India’s Inflation Expected to Cool
Expecting an increase of 3% for the upcoming retail inflation report. If confirmed, it was the lowest reading since April 2019. It would mean inflationary pressures continue to ease. The information will be important to set the Bank of India (RBI) monetary policy. After a 50 basis points Repo Rate cut to 5.5% and 100 basis points Cash Reserve Ratio cut to 3%, the Reserve Bank has now taken a neutral position. This will limit any opportunity for further rate cuts.
If inflation comes back down sharply, there may once again be calls for a rate cut at the August RBI policy meeting if cumulative tensions of slowing growth in both the domestic and global economy persist.
Trade, Tariffs, and Growth Forecasts
Adding to the bearish tone for the INR, Foreign Institutional Investors (FIIs) sold Rs. 446.31 crore worth of Indian equities on Wednesday. Meanwhile, the World Bank downgraded India’s FY26 GDP forecast to 6.3% from 6.7%, citing global trade headwinds and sluggish exports.
Still, India remains the fastest-growing major economy, according to the World Bank, a title that continues to attract long-term capital flows despite short-term volatility.
In the US, President Donald Trump hinted that the 90-day tariff deadline, originally set to expire on July 8, could be extended for several trade partners. “Willing to extend trade deadlines but won’t need to,” Trump said. This adds to the existing uncertainty over global trade policy, further weighing on risk sentiment.
DXY Slips, But USD/INR Rises
Interestingly, the USD/INR advanced in value despite a weak US Dollar Index (DXY), which decreased to 98.30, or its lowest level in over seven weeks. The weakness in the US Dollar follows mixed messaging on tariffs and the markets awaiting clarification from the Federal Reserve, which is not likely going to adjust its policy until it better understands the economic impact of new US trade decisions.
Later today, the markets’ eyes will be on the US Producer Price Index (PPI) data, which is expected to show moderate price increases from businesses. This will be an important indicator to see if Trump’s tariff policies are beginning to affect domestic prices.
USD/INR Struggles Near 20-Day EMA
Technically, the USD/INR pair is attempting to regain strength above its 20-day Exponential Moving Average (EMA) at 85.48. The pair has rebounded from a weekly low near 85.47, but momentum remains muted.
- RSI (14-day): Neutral, hovering between 40.00 and 60.00, signaling a sideways trend.
- Support levels: 85.30 (June 3 low), followed by 84.78 (May 26 low).
- Resistance levels: 86.10 (May 22 high), and 86.70 (11-week high).
A break above the 86.10 resistance could open the door for a rally toward 86.70, while sustained weakness may drag the pair back toward 85.30.
Conclusion
The Indian Rupee is under pressure as the markets brace for key domestic inflation data. Meanwhile, global uncertainties, from tariffs to monetary policy, continue to drive currency flows. The USD/ INR outlook will depend on whether the May CPI data shows further disinflation, which may impact a dovish shift by the RBI likely in August.
The Dollar is sensitive to political signals while the INR is sensitive to inflation, therefore the next 48 hours will determine the direction of the pair in the short term.
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