The Indian rupee faced renewed downward pressure on Tuesday, April 22, opening at 85.11 and quickly weakening to 85.19 against the US dollar, losing 4 paise from its previous close. This decline marks a temporary halt in the rupee’s brief rally, which had seen gains of 23 paise on Monday (April 21), closing at 85.15.

Opening Weakness and Technical Resistance

The rupee's decline came as the demand for the US dollar surged in early trade, with traders engaging in short-covering. The domestic currency, although showing strength the previous day, failed to breach the psychological resistance at 85, which is aligned with the 200-day moving average.

According to currency market participants, this failure to break the 85 mark represents a technical red flag. The rupee had touched an intra-day high of 85.03 on Monday—its strongest level in nearly a month—but couldn't sustain the momentum due to external pressures.

Investor Sentiment Hit by Global Economic Risks

Market observers noted that investor sentiment turned cautious amid ongoing concerns over US monetary policy, potential trade tariffs, and a possible recession. Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP, mentioned that:

“Recession fears driven by the tariff war are still alive. The US President’s renewed criticism of Fed Chair Powell has added to uncertainty.”

These factors have shaken market confidence, prompting a flight to safety into the dollar and pulling down emerging market currencies including the rupee.

Asian Peers and Yuan Under Pressure

The rupee’s weakness mirrored the decline in other Asian currencies, particularly the Chinese yuan, which slid to near 7.31 per dollar on Tuesday. The People’s Bank of China set the yuan mid-point at 7.2075, slightly weaker than Monday's 7.2055, suggesting continued pressure on the currency.

This regional softness added additional drag on the rupee, as currencies often move in tandem due to regional trade linkages and investor positioning.

A trader at a private Indian bank observed:

“The inability to break past 85 is a technical red flag, especially with Asian currencies weakening and the yuan under pressure.”

Dollar Index and Market Dynamics

While the rupee weakened, the US dollar index itself showed a slight drop of 0.19% to 98.09, reflecting investor nervousness over US economic policy. Despite this, the dollar demand remained strong in emerging markets due to safe-haven flows.

Interestingly, the dollar index has shed 5.7% in April, its steepest monthly decline in a decade. Yet, this hasn’t prevented the rupee’s fall, suggesting that local and regional factors are weighing more heavily on the currency.

Oil Prices and Bond Yields Add Pressure

Brent crude prices hovered around $66.61 per barrel in early trading, a level that, while not alarming, still adds mild pressure on the rupee given India’s heavy reliance on imported oil.

At the same time, US 10-year bond yields rose to 4.41%, signaling tightening financial conditions and increasing the attractiveness of dollar-denominated assets, further contributing to capital outflows from emerging markets like India.

NDF Market Indicates Limited Movement Ahead

In the offshore markets, the one-month non-deliverable forward (NDF) pegged the rupee in the 85.22–85.24 range, suggesting limited movement ahead unless a major shift in global sentiment occurs.

This reinforces the view that the rupee may continue to hover in a narrow range, constrained by global uncertainties and the lack of a domestic trigger for a strong rebound.

What Lies Ahead for the Rupee?

Despite Monday’s positive momentum driven by inflows into equity and debt, the rupee remains vulnerable to external shocks. Unless global risk sentiment improves, or positive domestic news emerges, the currency may continue to face resistance near 85, and support around 85.30 in the short term.

Traders and analysts will keep an eye on:

• US Federal Reserve comments and any hints of rate direction

• Geopolitical developments, especially involving trade policies

• Movements in crude oil prices and US bond yields

• The strength or weakness in the Chinese yuan, which acts as a regional anchor

Key Takeaways

• Rupee slipped 4 paise to 85.19 per dollar on April 22, reversing the gains seen on April 21.

• Technical resistance at 85 remains a critical level, tied to the 200-day moving average.

• Global economic concerns, including recession fears, tariff tensions, and weaker Asian currencies, led to rupee depreciation.

• The Chinese yuan’s weakness, coupled with rising US bond yields, further pressured the rupee.

• Dollar index declined, but safe-haven demand for the dollar remains high.

Brent crude and limited forward movement suggest rupee may stay range-bound in the near term.

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