Since late August, the US dollar (USD) has been on a noteworthy upward trajectory against the Indian rupee (INR), propelled by a convergence of factors.
This surge is attributed to a dip in oil prices and resolute statements from the Federal Reserve (Fed), fortifying the greenback’s position. Furthermore, India’s trade deficit recently expanded to a 10-month high of $24.2 billion in August, further weighing down the national currency.
However, as of October 11, the rupee made a modest recovery against the dollar, with the USD/INR pair declining to 83.16 from the previous day’s 83.25.
Why is the Indian rupee rising today?
Today’s upswing in the Indian rupee against the greenback comes mainly due to growing expectations that the US Federal Reserve will not impose further interest rate hikes, weighing on the demand for the dollar.
Notably, the Fed’s officials have indicated that additional rate increases may not be needed. One of the primary reasons behind this is the recent surge in long-maturity Treasury yields to multi-year highs.
“It’s certainly possible that higher long-term yields may do some of the work for us in terms of bringing inflation back down,” said Neel Kashkari, President of the Minneapolis Fed.
“But if those higher long-term yields are higher because their expectations about what we’re going to do has changed, then we might actually need to follow through on their expectations in order to maintain those yields.”
– he added.
Three Fed policymakers said in recent days that a surge in Treasury yields may decrease the need for more hikes. As a result, investors believe there is a chance of less than 20% that the central bank will deliver another quarter-point increase at its next meeting at the end of October.
USD/INR technical analysis
As the above chart demonstrates, USD/INR is facing a resistance level of 83.29, indicating the area where USD’s upside could be limited should the greenback stage another rally.
The pair is currently trading above the 20-day simple moving average (SMA), while the first major support threshold sits at 82.85.
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