This would happen just as new tariffs recently announced by the United States are about to be implemented. On Tuesday, the USD/INR currency pair settled at 87.77. It is making its way back up to its all-time high of 88.25, which serves as a very important resistance level. The looming tariffs, which will begin at 12:01 AM EDT or 09:31 PM IST on Wednesday, have raised concerns about the competitiveness of Indian exports.
The US administration has likewise criticized India for not condemning or doing enough to oppose Russia in its ongoing war against Ukraine. Consequently, they have limited sharply their market access and opted to raise tariffs on Indian imports to an astounding 50%. In reply, New Delhi announced political response with a stern six-point joint statement that these tariffs are “unjustified and unreasonable.” Indian officials have promised to do everything possible to protect their new economic interests.
Impact of US Tariffs on the Indian Economy
The forthcoming tariffs would have a deep chilling effect on Indian domestic exporters. Increased tariffs will make Indian products less competitive in global markets. This will dry up productive export expansion and force some businesses that rely on international trade to immediately experience a crushing financial burden.
Exporters are preparing for the effects these tariffs will have. At the same time, the Indian government is preparing to roll out an array of protective measures to insulate its economy from the expected fallout. This state of confusion has created apprehension among the affected market participants. Most of them are now – or soon will be – keeping a wary eye on what’s happening in the forex market.
The Indian government’s response shows that it takes its economic security seriously. Analysts say the government’s position could set the tone for both investor sentiment and market dynamics in the weeks to come. The developing tariff scenario is poised to shape trade relations between New Delhi and Washington, D.C. This exciting advancement has the potential to be a game changer for both countries’ economies.
Technical Analysis of USD/INR
As market participants watch how the USD/INR pair continues to shift, technical indicators are painting a confusing picture. Though USD/INR closed at 87.77, the pair is still just 0.55% off of its all-time high at 88.25. Given how close we are to long-term historical levels, it would seem reasonable to expect the currency pair to move in an upward direction.
That 14-day Relative Strength Index (RSI) has soared above 60.00. If it holds this high, we may witness a powerful accumulation of bullish momentum. A sustained RSI above 60.00 indicates the strength of the northward trend for USD/INR is unquestionable. This momentum might be enough to carry it past an important resistance line of 88.25 established on August 5th.
The immediate outlook is still positive as USD/INR continues to trade above the 20-day Exponential Moving Average (EMA). This technical indicator reinforces the idea that momentum to the upside will continue until proven otherwise by a major market development. Traders are strongly encouraged to especially monitor the impact of outside influences, most notably tariff news, on price action.
Future Outlook for the Indian Rupee
The outlook for the Indian Rupee seems grim in view of the tariffs that have been imposed as of late. Economic analysts are expecting further downside pressure on the currency, particularly against the US Dollar. It will happen just as the full impact of the tariffs begins to set in. The combination of heightened import costs and reduced export competitiveness could create a negative feedback loop for the Indian economy.
Both investors and entrepreneurs are strongly encouraged to take a careful and considered approach to this emerging terrain. Foreign currency exchange rates and international trade dynamics will work in concert with each other. This interaction will be crucial for determining economic conditions over the next few months.