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- The Indian Rupee strengthens as the US Dollar Index falls for the fourth straight session, hitting a fresh three-year low.
- US President Trump renews attacks on Fed Chair Powell, calls him “terrible,” and signals plans to name a replacement.
- Subdued Crude Oil prices and easing geopolitical tensions support the Rupee recovery from a three-month low.
The Indian Rupee (INR) trades stronger against the US Dollar (USD) on Thursday, buoyed by a sharp decline in the US Dollar Index (DXY), which tumbled to a fresh three-year low. The Greenback came under renewed pressure amid growing concerns over the independence of the Federal Reserve (Fed), following critical remarks from US President Donald Trump. Adding to the downward pressure were easing geopolitical tensions and subdued Crude Oil prices, both of which helped improve risk sentiment and support emerging market currencies, such as the Rupee.
Selling interest resurfaces in USD/INR, with the pair trading near 85.60 during American trading hours after a modest rebound the previous day. The pair is down roughly 0.45% and has breached below the 21-day Exponential Moving Average (EMA), suggesting a bearish outlook ahead.
Meanwhile, the US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, remains under pressure, marking its fourth consecutive daily loss. The index is currently hovering near 97.20, its lowest level since February 2022.
The major factor driving the Rupee’s gains today is the sharp weakening of the US Dollar following renewed criticism of Fed Chair Jerome Powell by the US President Donald Trump. Speaking at a press conference after the NATO Summit in The Hague, Trump called Powell “terrible,” accused him of being “very political,” and reiterated his call for interest rate cuts. Trump also confirmed he is considering “three or four” possible replacements for Powell, whose term ends in May 2026. The remarks have amplified concerns about political interference in US monetary policy, undermining investor confidence in the Fed’s independence and weighing heavily on the Greenback.
- The Indian Rupee, which had come under pressure during the Iran-Israel conflict and slipped to a three-month low of 86.89 last week, is staging a strong recovery following the ceasefire, reclaiming levels seen before the escalation amid easing geopolitical tensions.
- Subdued Crude Oil prices are offering relief to the Indian Rupee, with WTI trading near $64.70 and Brent around $66.80 — both down roughly 12% so far this week. The sharp pullback, driven by the Iran-Israel ceasefire and easing supply concerns, has improved India’s import outlook and reduced external pressure on the currency.
- On the Equity front, the Sensex soared over 1,000 points to close at 83,755, while the Nifty jumped 304 points to end at 25,549 — both gaining 1.21%. The sharp rally boosted investor confidence, with market capitalization on the BSE surging by ₹3.33 lakh crore to ₹457.33 lakh crore, further supporting sentiment around the Rupee.
- While the Rupee has recently gained ground against a weaker US Dollar, it remains one of Asia’s worst-performing currencies this year. A mix of global headwinds — including global tariff tensions and geopolitical uncertainty — along with domestic challenges like persistent FII outflows, a negative net international investment position (NIIP), and a widening trade deficit, continues to weigh on the currency.
- Former RBI Governor and ex-chairman of the Prime Minister’s Economic Advisory Council, C. Rangarajan, has cast doubt on India’s ability to achieve the $5 trillion economy target by 2025, calling it “an aspirational goal” that doesn’t align with current growth dynamics. “People have been talking about India becoming a $5 trillion economy by 2025. Today, our GDP is close to $2.7 trillion. Therefore, reaching $5 trillion is almost close to doubling our GDP,” he said, implying that the existing pace of economic expansion may not be sufficient to meet this ambitious milestone within the projected timeline.
- On the US side, President Donald Trump’s repeated criticism of the Fed continues to rattle markets. His central complaint is that interest rates remain too high, which he claims is hampering growth and inflating government debt costs. Trump has argued that with inflation under control, rates should be 2–3 percentage points lower, citing moves by the European Central Bank and warning that delays could stall the US economy.
- US President Donald Trump doubled down on his stance during recent remarks, stating, “We have no inflation. We have a tremendous economy. Hundreds of billions of dollars of tariff money is pouring in. Factories are being built.” He further claimed that nearly $15 trillion in investment was flowing into the US. While pushing for aggressive rate cuts, Trump acknowledged that if inflation were to rise significantly, he would support future rate hikes.
- According to the Wall Street Journal, President Trump is considering announcing his preferred choice for Federal Reserve Chair as early as September or October. Reported contenders include former Fed Governor Kevin Warsh, NEC Director Kevin Hassett, current Fed Governor Christopher Waller, and Treasury Secretary Scott Bessent.
- In recent congressional testimony, Fed Chair Jerome Powell defended the central bank’s cautious policy approach amid rising political scrutiny. While he acknowledged that recent inflation data has moderated, Powell warned that Trump’s proposed tariffs could add upward pressure on prices in the coming months. He reaffirmed that the Fed’s actions will remain data-dependent and aligned with its dual mandate of stable prices and maximum employment, rather than being influenced by politics. “We always do what we think is the right thing to do, and we live with the consequences,” Powell stated, underscoring the Fed’s commitment to institutional independence.
- Mixed US Macro Data Clouds Fed Outlook: Data released today revealed that Core PCE rose 3.5% QoQ in Q1, up from 3.4% previously and sharply higher than the 2.6% seen in Q4 2024, signaling persistent inflation and complicating the Fed’s rate cut trajectory. At the same time, the US economy contracted by 0.5% annualized in Q1, marking the first quarterly decline in three years, as high interest rates dampened consumer spending and business investment. Meanwhile, initial jobless claims fell to 236,000, beating the consensus of 245,000 and reflecting continued labor market resilience despite broader signs of economic softening.
Technical analysis: USD/INR breaks rising wedge, bias turns bearish
The breakdown in the USD/INR pair marks a notable shift in outlook after weeks of orderly gains within a rising wedge formation. The pair’s failure to hold above the 21-day EMA, coupled with a clear breach of the wedge pattern support, has triggered technical selling. Currently hovering around 85.67, the pair appears vulnerable as the former support level near 86.00 has now turned into resistance, capping upward attempts. This breakdown follows a textbook reversal pattern that often precedes deeper pullbacks.
The Relative Strength Index (RSI) has dropped sharply from near overbought territory and is currently at 47.69, below the neutral 50 mark, indicating fading bullish momentum. If the pair fails to reclaim the 86.00–85.90 zone, the next level of support lies near 85.00, followed by the 84.40 region, which aligns with previous swing lows from early June. On the upside, only a decisive daily close above 86.00-86.20 would negate the current bearish structure and reopen the path toward 86.90–87.00 levels. For now, the bias remains bearish as the pair confirms a technical breakdown from a key wedge pattern.
(This story was corrected on June 26 at 13:41 GMT to clarify that the Core PCE reading refers to the quarterly data from the GDP report, not the Fed’s preferred monthly inflation gauge.)
Indian Rupee FAQs
The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.
The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.
Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.
Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.
