The Indian Rupee (INR) extends its previous day’s correction against the US Dollar (USD) on Friday after rallying in the past few weeks. The USD/INR pair rises further to near 94.24 after recovering from the five-month low of 93.61, as the US Dollar continues to outperform due to fears that the Federal Reserve (Fed) will follow a more aggressive monetary tightening approach amid accelerating United States (US) inflationary pressures.
In the Asian trade, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, holds near its 19-month high of 103.24 posted on Thursday.
Dollar Index hits fresh high as Fed hike expectations firm into year end
Analysts at MUFG note that the US Dollar has “continued to strengthen,” pushing the Dollar Index to “a fresh year-to-date high.” They argue that the Dollar’s “renewed upward momentum has been encouraged by expectations that the Fed is likely to speed up the pace of rate hikes in response to the recent run of stronger US inflation data.”
The US Consumer Price Index (CPI) data on Tuesday showed that both the headline and the core inflation growth was faster than expected at 0.4% and 0.3%, respectively, on a monthly basis.
Meanwhile, investors await the US Producer Price Index (PPI) data for October, which will be published at 13:30 GMT.
What lent strength to INR in the past few weeks?
Strategists at Societe Generale highlight the Indian Rupee as “the surprise star performer in EMs this month,” noting a total return of “+1.6% vs USD” driven by robust foreign portfolio demand. They point out that FPI inflows have already “topp[ed] $5bn” as investors broaden market bets “beyond AI-themed markets like South Korea and Taiwan,” while sentiment has also been buoyed by “optimism over Iran truce following US mid-term election that has deflated Brent toward $90/b.”
Rising India’s inflation growth paves way for more RBI interest rate hikes?
On Thursday, India’s CPI data for October arrived at 6.09% year-on-year (YoY), higher than 5.93% estimates and the prior release of 5.54%. This is the 12th straight month of a faster growth in inflation at retail level.
Such a scenario strengthens the case for an interest rate hike by the Reserve Bank of India (RBI) at the December policy meeting. Indian central bank hiked its key Repo Rate also in the October meeting by 25 basis points (bps) to 5.5%.
Analysts at Commerzbank Research highlight that, “more worryingly for RBI, this low base effect will persist into November and December, which is likely to keep inflation elevated above 6.0% throughout Q4 2026.” This reinforces their broader view that price pressures will remain near the top of the central bank’s target band well into the medium term, underpinning expectations for further policy tightening.
Technical Analysis: USD/INR finds support near 93.60
In the daily chart, USD/INR trades at 94.24, keeping a bearish near-term tone as spot remains below the 20-day exponential moving average (EMA) at 94.58, which caps the topside.
The recent recovery in the Relative Strength Index (14) to 37.34 lifts the pair off oversold conditions but still suggests subdued bullish momentum while price trades under the key EMA barrier.
On the topside, immediate resistance is located at the 20-day EMA at 94.58, and a sustained break above this level would be needed to ease the current downside bias. On the downside, the five-month low of 93.61 is the key support level.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Economic Indicator
Consumer Price Index (YoY)
The India Consumer Price Index released by the Ministry of Statistics and Programme Implementation measures the average price change for all goods and services purchased by households for consumption purposes. CPI is the main indicator to measure inflation and changes in purchasing trends. A high reading is positive (or bullish) for the INR, while a low reading is negative (or bearish).
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