April 4, 2024
New Delhi, India
USDINR Today
Rupee (INR) demonstrated resilience in the Asian trading session, bolstered by a combination of favorable factors. The currency’s appreciation was primarily driven by a recovery in foreign inflows into local equities, a softer US Dollar (USD), and a decline in crude oil prices.
Foreign Inflows and Equity Market Performance
The INR’s strength was significantly supported by renewed foreign institutional investor (FII) participation in India’s equity markets. This influx of capital reflects growing investor confidence in the Indian economy, contributing to the currency’s upward trajectory. The positive sentiment in domestic equities further reinforced the Rupee’s position.
US Dollar Weakness
The USD experienced a decline, partly due to concerns over the potential impact of recent US trade policies on economic growth. This depreciation of the Dollar provided additional support to the INR, as the relative value of the Rupee increased in comparison.
Crude Oil Prices
India, being the world’s third-largest oil consumer, benefits from lower crude oil prices, which reduce the cost of imports and positively influence the trade balance. The recent dip in oil prices has thus played a role in strengthening the INR.
Impact of US Tariffs
However, the Rupee’s gains were tempered by the announcement from US President Donald Trump on April 2, 2025, regarding the implementation of a 26% tariff on imports from India, effective April 9. This move is part of a broader strategy to impose duties on all US imports, aiming to address trade imbalances and encourage domestic manufacturing. The impending tariffs have introduced a degree of uncertainty, potentially affecting India’s export sector and overall economic outlook.
US Economic Indicators and Federal Reserve Stance
In the United States, the Institute for Supply Management (ISM) reported that the Services Purchasing Managers’ Index (PMI) declined to 50.8 in March from 53.5 in February, indicating a slowdown in the services sector’s growth. Additionally, Federal Reserve Vice Chair Philip Jefferson emphasized the need for a cautious approach to monetary policy amid substantial uncertainty, particularly concerning recent trade policy changes. He indicated that the current interest rates are appropriately positioned to manage these uncertainties.
Outlook
Market participants are closely monitoring the developments surrounding the US tariffs and their potential implications for global trade dynamics. The Reserve Bank of India’s upcoming interest rate decision, scheduled for next week, is also in focus, as it will provide further insights into the central bank’s assessment of the economic landscape and its policy response to both domestic and international challenges.
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