Indian rupee (INR) Market Update
The Indian rupee (INR) is currently navigating a landscape of mixed influences, primarily driven by international trade dynamics and geopolitical tensions. Recent developments have seen the U.S. impose a 26% reciprocal tariff on Taiwanese goods as part of a growing trade war under President Trump, which has led to a slight decline in the dollar due to rising concerns about U.S. economic growth. According to currency analysts, the risks surrounding the rupee are "broadly balanced" at present levels.
However, the rupee has shown signs of steady weakening against the U.S. dollar, reflecting a broader trend among Asian currencies. This depreciation can largely be attributed to fears that surging energy prices will fuel inflation in India, which is the third-largest oil-consuming nation and relies heavily on imports to meet its oil needs. Higher crude prices are likely to exert upward pressure on domestic inflation, further complicating the economic landscape.
Investment sentiment is shifting away from Asian currencies, including the Indian rupee, as the dollar strengthens amidst expectations that Trump's policies—such as lower corporate taxes and deregulation—will spur U.S. economic growth. Additionally, the heightened uncertainty stemming from potential tariff increases targeting nations like China further accentuates volatility across Asian currencies. Analysts indicate that even the typically less volatile Indian rupee is likely to be affected by these ongoing disruptions.
Looking at the recent performance of key INR currency pairs, the INR to USD is currently trading at 0.011715, which is just 0.7% above its 3-month average of 0.011635, suggesting a relatively stable period, with a 3.9% range observed. Conversely, the INR to EUR is trading at 0.010431, which is 1.5% below its 3-month average, reflecting a more volatile phase with an 8.3% trading range. In the case of the INR to GBP, it is currently at 14-day lows near 0.008768 and 1.8% below the 3-month average, further indicating a challenging environment. Lastly, the INR to JPY stands at 1.6988, only marginally below its 3-month average, maintaining a relatively stable range.
The overall outlook for the Indian rupee remains cautious as the impacts of both domestic inflation pressures and international trade developments continue to unfold, adding complexity to future forecasts.