The Indian Rupee (INR) continued to depreciate in early European trading on Monday, driven by persistent capital outflows, global economic uncertainty, and renewed trade tariff tensions. The USD/INR pair maintained its upward momentum, supported by bullish sentiment around the US Dollar and concerns over a possible escalation in global trade disputes.
Heavy foreign outflows from Indian equities have added significant pressure on the domestic currency. So far in 2025, foreign investors have pulled nearly $15 billion from Indian stock markets, nearing the record $17 billion outflow witnessed in 2022. The market selloff has eroded over $1.3 trillion in market capitalization, weakening investor sentiment and pushing the INR into a vulnerable zone.
Although the rupee remains on the defensive, falling crude oil prices could offer some relief. As the world's third-largest oil consumer, India stands to benefit from reduced energy costs, which could help ease pressure on the trade deficit and stabilize the currency. Additionally, the Reserve Bank of India (RBI) is expected to continue intervening in the forex markets to slow the pace of the INR’s decline.
Last week, the RBI announced a $21 billion liquidity infusion to support lending activity and bolster economic growth. Meanwhile, the Indian government has reiterated its confidence in the central bank’s capability to manage rupee volatility through timely intervention.
In the broader context, the USD/INR pair is trading with a bullish bias, holding above the 100-day Exponential Moving Average (EMA) on the daily chart. The 14-day Relative Strength Index (RSI) remains above the neutral 50 mark, indicating continued buying interest. The immediate resistance lies at 87.53, with a potential upside toward 88.00 and 88.50. Key support levels include 86.48, followed by 86.14 and 85.60.
Market participants are also watching recent US labor market data. February’s Nonfarm Payrolls (NFP) showed a modest increase of 151K—below market expectations—while the unemployment rate edged up to 4.1%. Fed officials, including Jerome Powell and Mary Daly, have signaled caution over policy shifts due to rising economic uncertainty and volatile business sentiment. These macro factors could continue to influence USD demand, thereby impacting USD/INR.
FAQs on Indian Rupee and Economy
How does India’s economic performance impact the INR?India’s strong growth, averaging 6.13% from 2006 to 2023, attracts substantial foreign investment. Higher capital inflows raise INR demand, supporting the currency.
What role do oil prices play in Rupee valuation?As a major oil importer, India’s demand for USD rises with oil prices, leading to INR depreciation. Lower crude prices can ease this pressure.
How does inflation affect the Rupee?High inflation weakens INR, but if it prompts RBI to hike interest rates, higher yields attract investors and can support the Rupee.
Why does USD seasonal demand impact INR?India’s trade deficit and import-driven USD demand can lead to seasonal INR weakness, especially during high import periods or global volatility.
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