USD vs INR: Rupee slides to record low; key reasons behind the fall

USD vs INR: The rupee opened at a fresh record low of 93.91 against the US dollar on Monday, March 23. The currency extended its weakness after logging its sharpest single-day decline in four years in the previous session.

The rupee opened lower compared to its previous close of 93.76. It had fallen 1.2 per cent on Friday, the steepest drop since February 2022. In the offshore market, the rupee had already slipped past the 94 level, signalling continued pressure on the domestic currency.

Why the rupee is falling: key reasons

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Multiple global and domestic factors are driving the weakness in the rupee.

Manoj Kumar Jain, Director at Prithvi Finmart, said the dollar index is witnessing very high volatility but has rebounded strongly. The index settled on a positive note at 99.46 on Friday, up 0.40 per cent. The USD-INR March futures contract also ended higher by 0.99 per cent at 93.6100 on the National Stock Exchange.

He said the dollar is gaining strength due to uncertainty around US interest rate cuts after the US Federal Reserve kept rates unchanged. At the same time, rising crude oil prices are fuelling inflation worries. This is increasing fears of higher interest rates going ahead.

The dollar is getting stronger because the US 10-year bond yield has gone above 4.35 per cent. This is putting more pressure on emerging market currencies like the rupee.

Global tensions, especially in West Asia, are making markets unstable. There is a lot of uncertainty. Because of this, investors are choosing safer options. They are putting more money into the US dollar.

In India, foreign investors are continuously selling shares in the stock market. This is weakening the rupee. At the same time, higher prices of oil and other goods are increasing the need for dollars, as India imports many of these items.

Jain added that India’s trade deficit could widen due to rising imports. This may continue to pressure the rupee in the near term. The recent heavy sell-off in domestic equities has also pushed the rupee to record low levels.

Volatility likely to persist this week

Jain expects the dollar index to remain volatile this week. It may trade in a wide range of 98.25 to 101.85 amid global market volatility.

For the rupee, he expects continued volatility. The USD-INR pair could trade in the range of 92.6000 to 95.5000 this week.

Technical view: bullish bias for USD-INR

On the technical charts, the USD-INR March futures contract has extended its gains. The pair is trading above its moving average trend-line support level of 92.6400.

Momentum indicators remain strong. The RSI is above 70 levels, while MACD is showing a positive crossover on daily charts. The pair has also crossed the 93.0000 level, indicating strength.

Support is seen at 93.3000–92.8800, while resistance is placed at 94.2000–94.8000.

Jain recommends buying above 93.5000 with a stop loss below 92.6000 for targets of 94.4000–95.2000.