India-Pakistan Tensions Impact Rupee Outlook
The ongoing tensions between India and Pakistan, combined with the US employment data and the RBI's monetary policy, will be key factors influencing the rupee's performance in the coming days, making it essential for market participants to stay informed about the latest developments.
The Indian rupee is expected to open marginally higher-to-flat against the US dollar, with market participants closely watching news related to the India-Pakistan border tensions, which have increased due to Pakistan's information minister stating that India intends to launch a military strike within 24-36 hours.
The 1-month non-deliverable forward indicates a possible opening range of 85.00 to 85.70, while most Asian currencies are firmer, with the offshore Chinese yuan trading at 7.2720 to the US dollar. The dollar index remains little changed, weighed down by concerns over US President Donald Trump's trade policy and weak US data.
The Indian Rupee (INR) has strengthened in the early European session, driven by possible equity inflows and US Dollar sales from local exporters. The Reserve Bank of India (RBI) has a target of maintaining inflation at 4% and uses interest rates to achieve this goal, and the RBI intervenes in FX markets to maintain the exchange rate within a limited range.
The USD/INR pair is oversold, with the 14-day Relative Strength Index (RSI) below 30.00, indicating potential for further consolidation or a temporary recovery. The immediate resistance level for USD/INR is 85.14, while a breach of the lower limit of the descending trend channel could lead to a drop to 84.22.
The upcoming US April employment data, including the Nonfarm Payrolls, Unemployment Rate, and Average Hourly Earnings, will be closely watched, with expectations of 130K job additions, which may impact the rupee's outlook and the overall currency market.