Weaker Dollar and FPI Inflows to Support Indian Rupee, Says UBI Report

The Indian rupee is poised for support due to a weaker US dollar index (DXY) and anticipated strong foreign portfolio investment (FPI) inflows, according to a report by the Union Bank of India (UBI). These factors could help stabilize the rupee amidst global uncertainties and fluctuating oil prices.

While the rupee has shown signs of strengthening as domestic issues settle, the report cautions that increased trade tariffs or cross-border tensions could negatively impact its sentiment. Recently, despite entering a consolidation phase, significant FPI outflows have challenged gains, though an anticipated robust RBI dividend announcement has bolstered confidence, leading to a 0.34% appreciation this week.

The US Dollar Index remains below 99.00, creating favorable conditions for the Indian rupee. Hopes for a temporary trade deal between India and the US before July 8 are boosting positive sentiment, with India seeking relief from a 26% additional export tariff, likely benefiting the rupee.

Continued demand for dollars by major importers and oil firms restrict potential rupee gains, with the USD/INR expected to trade sideways. Key technical levels include support at Rs 84.80 per dollar and resistance near Rs 85.90. The report warns that a rising DXY or new trade tensions pose risks to the rupee.

(With inputs from agencies.)