The USD/INR currency pair has been on a rollercoaster ride in recent months, with the Indian rupee gaining strength against the US dollar. However, the pair is now eyeing multi-tested resistance at 83.00, which could prove to be a crucial level for its future direction.
The Indian rupee has been one of the best-performing emerging market currencies in 2021, thanks to a combination of factors such as a strong economic recovery, a decline in COVID-19 cases, and a surge in foreign investment inflows. This has led to a rally in the rupee, which has appreciated by around 3% against the US dollar since the start of the year.
However, the USD/INR pair has found support at around 72.50-73.00 levels, which has prevented the rupee from strengthening further. This support level has been tested multiple times in the past few months, and it remains to be seen whether it will hold or break in the coming weeks.
One of the key factors that could impact the USD/INR pair’s direction is the US Federal Reserve’s monetary policy decision. The Fed is expected to announce its verdict on interest rates and its bond-buying program on September 22. The market is anticipating that the Fed may start tapering its bond purchases, which could lead to a strengthening of the US dollar.
If the Fed does announce tapering, it could lead to a short-term weakness in the Indian rupee, as foreign investors may pull out their investments from India’s equity and debt markets. This could lead to a rise in demand for US dollars, which could push up the USD/INR pair towards its multi-tested resistance at 83.00.
On the other hand, if the Fed decides to maintain its accommodative stance and delay tapering, it could lead to a further strengthening of the Indian rupee. This could push the USD/INR pair towards its support level at 72.50-73.00.
Apart from the Fed’s decision, there are other factors that could impact the USD/INR pair’s direction. One of them is India’s economic recovery, which has been robust so far. If India’s GDP growth continues to outpace expectations, it could lead to a further strengthening of the rupee.
Another factor is geopolitical tensions between India and China. If tensions escalate, it could lead to a flight to safety among investors, which could benefit the US dollar and push up the USD/INR pair.
In conclusion, the USD/INR pair is currently eyeing multi-tested resistance at 83.00, which could prove to be a crucial level for its future direction. The Fed’s monetary policy decision on September 22 could be a key catalyst for the pair’s movement in the short term. However, there are other factors such as India’s economic recovery and geopolitical tensions that could impact the pair’s direction in the long term.
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