The Indian Rupee (INR) strengthened to a weekly high near 85.43 against the US Dollar (USD) during Wednesday’s European trading session.
This came as the US Dollar steadied following news that the US and China reached a framework agreement on trade after two days of talks in London. The US Dollar Index (DXY), measuring the Greenback against six major currencies, inched up to about 99.15.
US Secretary of Commerce Howard Lutnick announced that both countries agreed on a framework to implement the trade deal made in Geneva in May, pending approval from President Donald Trump.
He expressed confidence that China will reduce non-tariff barriers on exports of rare earths and magnets, while the US will ease export restrictions on advanced chips. The Chinese government also confirmed a positive outcome and will send the agreement to President Xi Jinping for approval.
The US Dollar remained steady amid hopes that the trade deal would ease tensions. However, analysts from National Australia Bank cautioned that the details will be crucial and that rebuilding trust between Presidents Xi and Trump remains a challenge.
On the legal front, a US Federal Appeals court ruled that tariffs imposed by President Trump related to border issues and announced on April 2 will stay in place until their legality is decided. The next hearing is scheduled for July 31.
Meanwhile, the Indian Rupee gained on strong foreign inflows and expectations of lower oil prices. Foreign Institutional Investors (FIIs) bought Rs 2,301.87 crore worth of Indian equities on Tuesday.
The US Energy Information Administration forecasted Brent crude oil could fall to $61 per barrel by the end of 2025 due to demand concerns and rising supply. Lower oil prices are positive for India, a major oil importer.
Investors are also awaiting the US Consumer Price Index (CPI) data for May, expected to show inflation rising to 2.5% year-on-year from 2.3% in April. Core CPI, which excludes food and energy, is forecasted to increase to 2.9% from 2.8%. Higher inflation may limit the Federal Reserve’s ability to cut interest rates soon. The CME FedWatch tool suggests no rate cuts in June or July.
In India, the CPI for May is expected to show a slight slowdown in inflation to 3% year-on-year from 3.16% in April. This could support expectations for further rate cuts by the Reserve Bank of India (RBI), which recently cut the repo rate by 50 basis points to 5.5%.
Technically, the USD/INR pair is struggling to stay above its 20-day exponential moving average near 85.49. The relative strength index indicates a sideways trend. Key support levels are at 85.30 and 84.78, while resistance lies near 86.10 and 86.70.
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