The Indian Rupee took a hit during Thursday’s Asian trading as markets digest multiple headwinds. A stronger dollar, coupled with foreign investors pulling out of Indian equities, has put fresh pressure on the currency despite the central bank’s efforts to steady the ship.
The timing couldn’t be more interesting, with Prime Minister Modi headed to Washington for crucial talks with Trump administration officials. Word on the street is that Modi’s bringing a peace offering – potential tariff cuts across several sectors – to prevent what could become an ugly trade spat with India’s largest trading partner.
But it’s Modi’s planned meeting with Elon Musk that’s really got people talking. As head of Trump’s newly minted Department of Government Efficiency, Musk’s wearing two hats here – one as a government official and another as the boss of Tesla and Starlink, both eyeing India’s massive market.
There’s some silver lining though. Oil prices took a breather after Trump jumped on the phone with Putin and Zelenskyy to broker peace talks. That’s welcome news for India, which burns through oil like there’s no tomorrow.
On the inflation front, India’s got something to smile about. January’s CPI print came in at 4.31%, beating expectations and dropping nicely from December’s 5.22%. The U.S., meanwhile, is dealing with stickier prices – their January CPI jumped to 3.0%, spooking markets that were hoping for lower numbers.
Looking at the Rupee’s technical picture, the currency’s been riding above its 100 day EMA, but it’s not all smooth sailing. The key levels to watch? 87.00 as immediate resistance, with the big prize being that alltime high near 88.00. On the flip side, 86.35 looks like the floor for now.
With the Fed still hawkish and Powell warning there’s “more work to do” on inflation, currency traders are in for an interesting ride. Markets have already scaled back their rate cut bets for the year – now expecting just one quarter point trim instead of two.
