USD vs INR: Rupee inches closer to 97 as global risks rise; is 98 the next target?

USD vs INR: The rupee weakened to a record low of 96.96 against the US dollar on Wednesday, pressured by rising US bond yields, elevated crude oil prices and continued strength in the greenback, as investors turned cautious on emerging-market assets.

The sharp fall in the domestic currency comes amid growing concerns that global interest rates may remain higher for longer, tightening global liquidity conditions and triggering fresh capital outflows from riskier assets.

Market participants said sustained demand for the US dollar, coupled with geopolitical uncertainties and higher energy prices, continued to keep pressure on Asian currencies, including the rupee.

According to Amit Pabari, founder of CR FOREX, the Reserve Bank of India is expected to transfer a record dividend of nearly Rs 3 trillion to the government, higher than last year’s Rs 2.7 trillion payout.

He said the surplus, largely driven by forex operations, elevated global interest rates and rising gold prices, could help reduce government borrowing pressure and improve overall market sentiment.

“Markets understand that a strong RBI dividend can support confidence, but it cannot fully offset expensive oil and relentless dollar demand,” Pabari said.

USD-INR may move towards 98 level

The forex market veteran said the 97 level could act as a near-term resistance zone for the USDINR pair and may trigger temporary intervention or defensive action.

However, he warned that persistent geopolitical tensions and the absence of any meaningful de-escalation could keep the rupee under pressure in the coming sessions.

“From a technical perspective, the 97.00 zone may offer some near-term resistance and trigger temporary defence in USDINR. However, with geopolitical tensions still elevated and no meaningful signs of de-escalation visible yet, that level is eventually expected to give way,” he said.

According to him, the USDINR pair could gradually move towards the 97.50–98.00 range unless positive developments emerge on the geopolitical front.

The rupee has remained under pressure in recent weeks due to rising crude oil prices, strong US economic data and expectations that the US Federal Reserve may keep interest rates elevated for a longer period.