USD vs INR: Rupee breaches 93 for first time — Why it is falling

USD vs INR: The rupee fell to a fresh record low of 93.31 against the US dollar in early trade on Friday, breaching the 93 mark for the first time. The sharp fall extends losses triggered by global volatility, rising energy prices and sustained foreign outflows.

The currency had earlier weakened to 92.92, after crossing its previous low of 92.63 touched earlier this week.

Middle East tensions, oil prices in focus

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The weakness in the rupee comes amid disruption in global energy supplies due to the ongoing conflict in the Middle East. Higher crude oil prices are adding pressure on India’s external balance and risk disturbing the growth-inflation equilibrium.

Expert view: Dollar index to remain volatile

According to market experts, “the dollar index shows very high volatility and plunged again.” It settled at 99.012 on Thursday, down 1.06 per cent.

Experts said the index weakened after signals from the US President on easing sanctions on Iranian oil amid rising crude prices. At the same time, expectations of rate cuts by the US Federal Reserve have also weighed on the dollar.

However, they cautioned that “escalation of the US and Iran war and higher energy prices are supporting the dollar index,” suggesting continued volatility.

“The dollar index could trade in the range of 98.45–99.85 in today’s session,” they added.

Expert view: Rupee under pressure from outflows, trade deficit

On the rupee, experts noted that “the rupee extended its fall amid continuous outflow of FPIs from domestic equity markets and dollar demand from importers due to higher energy and commodity prices.”

They also flagged that “the trade deficit could widen due to rising imports and continue to pressurize the rupee,” while a “heavy sell-off in domestic equity markets” is adding to the weakness.

“We expect the rupee to remain volatile in today’s session amid volatility in the dollar index, domestic equity markets and geopolitical tensions,” experts said, adding that the USD-INR pair could trade in the range of 92.2000–93.5500.

Technical view: Bullish bias intact

From a technical perspective, experts said the USD-INR March futures contract has extended gains and is trading above its moving average trend-line support of 92.3000.

“RSI is above 60 levels and MACD is showing a positive crossover on daily charts,” they noted, indicating strength in the pair.

Support is placed at 92.3500–92.0500, while resistance is seen at 93.0000–93.2000. With the pair now moving above key resistance levels, the trend remains supportive of further upside.

Trading strategy

Experts said earlier buy calls in the 92.1200–91.8000 range with a stop loss below 91.5500 have already achieved targets of 92.7000–93.0000.

“We suggest waiting for some corrective dips for initiating fresh long positions in the pair,” they added, citing elevated volatility in global markets and crude oil prices.