May 14, 2025
New Delhi, India
USDINR
The Indian Rupee extended gains on Wednesday, supported by easing geopolitical tensions and renewed global trade optimism. A ceasefire between India and Pakistan and the recently concluded US-China trade agreement lifted market sentiment, prompting foreign inflows and strengthening the local currency.
Traders welcomed the pause in hostilities between India and Pakistan, which followed strong remarks by Prime Minister Narendra Modi, warning against “nuclear blackmail” and emphasizing that further action against Pakistan would depend on its future conduct. The ceasefire has held across Jammu and Kashmir and border towns, offering a sense of stability to the region.
Meanwhile, the US and China reached an understanding to reduce mutual tariffs—an encouraging sign for global trade. The news gave a boost to risk appetite, while also contributing to a temporary pullback in the US Dollar’s dominance.
Adding to the positive sentiment for the INR, India’s headline inflation dropped to 3.16% in April from 3.34% in March, according to the Consumer Price Index (CPI) data released Tuesday. The print came in below market expectations of 3.27%, marking the sixth straight monthly decline. This softening of inflation strengthens the Reserve Bank of India’s case for adopting an accommodative stance, as hinted by Governor Sanjay Malhotra after the April policy meeting.
Foreign Portfolio Investors (FPIs) have resumed buying into Indian equities and debt markets, further propping up the Rupee. However, rising crude oil prices remain a concern. As the world’s third-largest oil importer, India is vulnerable to energy price fluctuations, which can weigh on the INR due to higher import bills.
Also limiting gains were continued US Dollar purchases by state-run Indian banks, possibly on behalf of the Reserve Bank of India, and global investors awaiting cues from a string of Federal Reserve officials’ speeches scheduled for later in the day. Fed members Christopher Waller, Philip Jefferson, and Mary Daly are expected to provide insights into the future direction of US monetary policy.
On the US data front, inflation softened slightly. Headline CPI rose 2.3% YoY in April, slightly below the 2.4% forecast, while the core CPI remained steady at 2.8% YoY. On a monthly basis, both indexes rose 0.2%, matching expectations.
In early European trade on Wednesday, the Indian Rupee held firmer, backed by improving global risk sentiment and lower domestic inflation. Traders are now watching for further signals from the Fed to gauge the next move for the Dollar-Rupee pair.
Disclaimer:
CurrencyVeda provides this news article for informational purposes only. We do not offer investment advice or recommendations. Before making any investment decisions, please conduct thorough research, consult with financial experts, and carefully consider your financial situation, risk tolerance, and investment goals. Investing in the stock market carries risks, and it’s essential to make informed choices based on your individual circumstances. CurrencyVeda is not liable for any actions taken based on the information provided in this article.
