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The Indian Rupee (INR) edged lower against the US Dollar (USD) during the Asian session on Tuesday. However, the USD/INR pair is likely to continue to face resistance as the INR is supported by certain market factors. Investors are closely watching the Federal Reserve’s policy decision, as well as any progress on the US-India trade deal and ongoing cross-border tensions.
The INR was supported by strong equity inflows, which amounted to INR 276,981 million. Moreover, the recently launched 10-year government bonds with a coupon of 6.33% received strong demand, in line with market expectations. This positive reaction is likely to encourage more foreign investment, further strengthening the rupee.
The downside of the USD/INR pair is likely to be limited by importers’ hedging needs and potential foreign exchange purchase intervention by the Reserve Bank of India (RBI). The central bank is expected to continue to strengthen its foreign exchange reserves, which rose for the eighth consecutive week to $688 billion as of April 25, a six-month high.
Moreover, the continued recovery in crude oil prices exerted downward pressure on the INR as India is the world’s third-largest oil consumer. However, crude oil gains were limited by OPEC+’s decision to accelerate production increases. Last week, OPEC+ (the Organization of the Petroleum Exporting Countries and its allies) agreed to increase production for the second consecutive month, announcing an increase of 411,000 barrels per day in June.
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