The Indian rupee continued to slide against the U.S. dollar, with USD/INR extending its gains as strong demand for the greenback kept emerging market currencies under pressure. The rupee’s decline reflects a broader trend of dollar strength, driven by resilient U.S. economic data and expectations of prolonged higher interest rates.
Global investors have favored the dollar as the Federal Reserve remains cautious about cutting rates, reinforcing its appeal over riskier assets. Recent U.S. labor market and inflation figures have reduced speculation of early monetary easing, keeping the greenback well-supported and limiting any upside for the rupee.
Meanwhile, India’s trade balance and foreign capital flows are also weighing on the local currency. Higher oil prices, which increase India’s import costs, have put additional strain on the rupee, while foreign institutional investors have shown caution amid global economic uncertainty. The Reserve Bank of India has intervened selectively to prevent excessive volatility, but its ability to counter sustained dollar demand remains limited.
Broader risk sentiment has further pressured the rupee. With global markets adjusting to shifting rate expectations, emerging market currencies, including the rupee, have faced renewed selling pressure. Investors are closely monitoring signals from the Fed and the RBI for any indications of policy shifts that could impact the currency pair’s trajectory.
USD/INR is expected to stay on an upward trajectory unless the Fed softens its stance on rate policy or India sees stronger capital inflows. Until then, the dollar’s momentum continues to dictate market sentiment, keeping the rupee on the defensive.
