The Indian rupee continues to gain ground against the US dollar and was up on Monday to send the USDINR pair to three-month lows of 85.39. The pair has been on an extended downtrend in the last three weeks and is down by 0.2% year-to-date.
The rupee’s upsurge is propelled by rising foreign institutional inflows into Indian equities markets and strong macroeconomic indicators in the world’s fifth-largest economy. In addition, the dollar is weighed down by risk aversion in US financial markets amid investor concerns regarding the escalating trade tariff wars.
Indian equities have been on a recovery path in recent weeks, with the benchmark Nifty 50 and Sensex indexes both gaining more than 4.4% in March. Foreign Institutional Investors net-bought $3.07 billion worth of Indian equities in the last two weeks, helping offset the $3.43 billion net-sold in the first half of the month. Notably, that was the first positive net trading by FII in a two-week window since the year began. That has helped increase dollar liquidity, limiting the upside for USDINR.
Meanwhile, India’s Purchasing Managers Index (PMI) data will be out on Wednesday and could add fresh volatility into the USDINR trading pair. The rupee’s strength is also helped by lukewarm global crude oil trajectory, which has limited the demand for the dollar.
India’s dollar reserves have been rising for the last four weeks in succession according to official data, and rose by $4.53 billion to $658.80 billion in the week ending March 28.
USDINR Prediction
USDINR pivots at 85.47 and the downside will prevail if resistance persists at that level. The currency pair will likely find its initial support at 85.35. Breaking below that level will signal a stronger momentum that could push the action lower to test 85.20.
Conversely, going above 85.47 could shift the momentum to the upside. That will likely push the currency pair to the first resistance at 85.61. The downside narrative will be invalid above that mark and the resulting momentum could take USDINR higher to test 85.77.
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