INR Strengthens Against USD, Dollar Index Slides; March USD/INR Levels?

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INR Strengthens Against USD, Dollar Index Slides; March USD/INR Levels?
Credit: © Reuters.

By Malvika Gurung -- The Indian rupee opened higher against the US dollar on Thursday, following an anticipated 25 basis point rate hike by the Federal Reserve on Wednesday and hints of a possible pause in future rate hikes amid the recent banking crisis.

The domestic currency opened at its strongest level against the greenback in the week at 82.37/$1 compared to its close at 82.65 on Tuesday, as the forex market in India remained closed on Wednesday.

The US dollar tumbled to its near seven-week lows on Thursday after the Fed softened its rhetoric on tightening monetary policy- signaling that it may be considering an eventual pause in policy tightening to prevent further economic headwinds.

The US dollar index dipped 0.21% to 101.76 levels, its low since Feb 3, 2023. US bond yields fell sharply too.

Kunal Sodhani, Vice President, Global Trading Center, Shinhan Bank, said to that even though the Fed raised rates by 25 bps as expected, it dropped the forward guidance, mentioning that ‘some additional policy firming may be appropriate’, instead of ‘ongoing increases in the target range will be appropriate’, terming it as a dovish hike.

“DXY dropped towards 102.5 levels, which itself is a minor support, following 101.8 (February 2nd low). Consolidation may continue with DXY while trajectory may only change above the 200 day SMA at 106.6 levels,” he noted.

On the domestic front, the forex expert pegs some demand for INR, considering the March year end.

“For USD/INR , for March 81.80 acts as a support while 82.80 a resistance,” he added.

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