The Indian Rupee (INR) continued its downward correction against the US Dollar (USD) on Friday, extending losses from the previous day. The USD/INR pair climbed to near 94.19, recovering from a five-month low of 93.61. This movement comes as the US Dollar strengthens due to expectations of more aggressive monetary tightening by the Federal Reserve (Fed) in response to rising inflationary pressures in the United States.
The US Dollar Index (DXY), which measures the Greenback’s value against six major currencies, held near its 19-month high of 103.24, reached on Thursday. Analysts at MUFG noted that the US Dollar has continued to strengthen, pushing the Dollar Index to a fresh year-to-date high. They attributed this upward momentum to expectations that the Fed will accelerate the pace of rate hikes following recent stronger US inflation data.
Meanwhile, the Indian Rupee had previously benefited from robust foreign portfolio demand, with inflows topping $5bn. Strategists at Societe Generale highlighted the Rupee as a standout performer in emerging markets this month, driven by optimism over an Iran truce and deflated Brent crude oil prices. However, rising inflation in India, with October’s CPI data at 6.09% year-on-year, has strengthened the case for further interest rate hikes by the Reserve Bank of India (RBI).
Technically, the USD/INR pair trades at 94.15, maintaining a bearish near-term tone as it remains below the 20-day exponential moving average (EMA) at 94.57. Immediate resistance is located at this EMA level, while key support is at the five-month low of 93.61.