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USD/INR Exchange Rate Forecast as Rupee Rebounds

The USD/INR price crashed to the lowest level since September 22 as the dollar weakness continued. It was trading at 80.47, which was significantly lower than the year-to-date high of 83.30. The GBP/INR and the EUR/INR have also pulled back as the risk-on sentiment has resumed.

US dollar index crash

The USD/INR price has been in a strong bearish trend in the past few weeks. This crash happened as the US dollar index (DXY) pulled back from the year-to-date high of $115 to about $106. The sell-off accelerated after last week’s American inflation data and subsequent statements by some Fed officials.

According to the Bureau of Labor Statistics (BLS), the headline American inflation dropped from 8.3% in September to 7.7% in October. Core inflation also crashed to 6.3%. Therefore, there are signs that inflation may have peaked, which means that the Fed will likely slow its rate hikes in the coming months.

Several Fed officials are supportive of pivoting. In statements last week, Mary Daly and Loretta Mester said that they supported a pivot in the coming meetings. Such a pivot will involve the  Federal Reserve hiking interest rates by 0.50% after having hiked by 0.75% four times this year. 

Meanwhile, in India, there is a high likelihood that the Reserve Bank will also embrace a relatively dovish tone as well. Unlike other countries, inflation has been relatively muted this year in India. For one, India took advantage of the crisis in Ukraine to scoop cheap Russian oil and gas. As a result, India is expected to have one of the fastest-growing economies in the world this year.

USD/INR forecast

The USD to INR price has been in a strong bearish trend in the past few days. It has managed to move from a high of 83.30 to 80. As it dropped, it managed to move below the important support at 81.87, the lowest level on October 26. The USD/INR pair has dropped below all moving averages while the stochastic oscillator has moved to the oversold level.

Therefore, the price will likely continue falling as sellers target the next psychological level at 80. A move above the resistance at 81 will invalidate the bearish view.