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USD/INR Forecast: Indian Rupee Keeps Gaining Strength

USD/INR exchange rate is in a downtrend once again as the US Dollar shows signs of weakness. The increasing oil prices and the upcoming rate hike decision by RBI are the key factors affecting the US Dollar to Indian Rupee. The pair also shows a direct correlation with the DXY Index.

On Tuesday, USDINR wiped off its yesterday’s gains as the pair plummeted by 0.11%. This meant a 0.95% price decline from the March high of 82.87. Considering the year opening, Indian Rupee has strengthened against US Dollar by 0.84%.

Indian Rupee Strengthens Amid Falling DXY

The DXY Index, also known as the dollar strength index, tracks the USD against six major global currencies. The chart shows that after rising by 2.81% in February, the DXY Index plummeted by 2.25% in March. The index is still in a tailspin as the BRICS nations reconsider their dependence on the dollar.

According to a senior Russian official, the BRICS alliance is working to develop its own currency. While the move is unlikely to affect the US dollar’s dominance in the near term, it clearly sends a message. The DXY Index has fallen more than 4% since 8 March 2023.

DXY Chart
DXY Chart

USD/INR To Remain Volatile This Week

Due to multiple reasons, I expect the USD/INR to remain volatile this week. The pair can still drop slightly below 82 as the Reserve Bank of India (RBI) will be deciding on the interest rates tomorrow. A hawkish decision can send the pair to retest the bottom of the ascending triangle around the 81.9 level.

As DXY approaches its YTD lows, a bounce in the dollar strength index is also quite possible. This can trigger a similar bounce in US Dollar to the Indian Rupee exchange rate. However, I expect the USD/INR pair to break down below the triangle pattern if DXY Index dips below 100 points.

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US Dollar To Indian Rupee