The Indian rupee (INR) is poised to open stronger on Friday, supported by a broad decline in the U.S. dollar following soft U.S. economic data that reinforced expectations for a Federal Reserve rate cut later this year.
According to the 1-month non-deliverable forward (NDF), the rupee is expected to open between 85.34 and 85.36 per U.S. dollar, stronger than 85.55 in the previous session. The move reflects the global dollar retreat after subdued economic indicators hinted at a shift in U.S. monetary policy.
Dollar Demand Still Pressuring INR
Despite the temporary reprieve:
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The rupee has remained under pressure for most of the week, largely due to persistent dollar demand for near-term payments.
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A large state-run bank and two foreign banks were among the most active dollar buyers, contributing to the weakness.
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A Mumbai-based currency trader noted that the near-term bias on the rupee has shifted from positive to neutral, making it challenging to form a high-conviction view at current levels.
Trade Deficit Adds Headwind
Further complicating the rupee’s outlook is India’s April trade deficit, which stood at $26.42 billion—well above the $20 billion forecast by economists. The wider-than-expected deficit reflects higher imports and slower export recovery, putting additional downward pressure on the local currency.
Geopolitical Context
While the India-Pakistan truce has eased some geopolitical tensions, the rupee has still underperformed most Asian peers this week, highlighting localized challenges including dollar demand and macroeconomic concerns.
