The Indian rupee's gains partially reversed after hopes for an imminent US-Iran deal faded, while the Reserve Bank of India's decision to hold rates left the currency without fresh support. Traders now turn to next week's US CPI report as the next catalyst for USD/INR.
Rupee's Iran-deal rally fades
The US dollar weakened across the board on Tuesday after Qatari mediators said the language for a possible US-Iran agreement had been drafted. Momentum built further after US Treasury Secretary Bessent confirmed a deal could have arrived within a day and would have included reopening the Strait of Hormuz, easing geopolitical risk.
The rupee extended its gains alongside the dollar's slide, tracking the same relief. However, both moves then partially reversed, likely because the expected deal announcement failed to materialize.
RBI holds rates, offers no fresh support
The Reserve Bank of India left its repo rate unchanged at 5.25%, maintaining a neutral stance. Governor Malhotra stressed data dependence and said the central bank is neither hawkish nor dovish, and the lack of hawkish guidance likely weighed further on the rupee.
In the bigger picture, the rupee remains on a bearish structural trend against the dollar, so dip-buyers continue to look for opportunities around strong technical levels to push USD/INR toward new highs.
US CPI report is the next catalyst
Next week's US CPI report is the key event for markets, feeding directly into the September FOMC decision and the Jackson Hole Symposium. A hot print would likely trigger a dollar rally as traders raise rate hike bets, while a softer number would ease pressure on the Fed to keep tightening and weigh on the greenback.
On the daily chart, USD/INR bounced around the 95.10 support zone, with buyers eyeing a rally toward the 96.10 resistance; a break below 95.10 would open the door to the 94.00 handle next. On the shorter timeframes, price broke above the downward trendline that had defined the recent bearish momentum, with sellers needing a break below both that trendline and the 95.10 support to gain conviction for a move to new lows.
Jobless claims and the non-farm payrolls report round out this week's US data before the CPI print lands.
Source: Investinglive
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