USD/INR weakens as Indian Rupee rises to over three-week high

• The Indian Rupee gains traction in Thursday’s early European session. 
• A broadly weaker Greenback, an uptick in exporter USD sales and modest inflows support the INR.
• Investors await the US weekly Initial Jobless Claims data, which is due later on Thursday. 

The Indian Rupee (INR) rises to over a three-week high on Thursday. Persistent weakness in the Greenback, an uptick in exporter USD sales and modest inflows boost the INR. The Reserve Bank of India (RBI) has likely been "opportunistically" absorbing USD inflows over the past few sessions, probably to replenish the foreign exchange reserve expanded to support the INR over the past few months, according to reports.

However, a rise in Crude Oil prices amid the ongoing geopolitical tensions in the Middle East weighs on the local currency as India is the world's third-largest oil consumer. Furthermore, the more hawkish stance from the US Federal Reserve (Fed) at its March meeting on Wednesday could lift the US Dollar (USD) and weigh the Indian currency. Looking ahead, the US weekly Initial Jobless Claims will be released later on Thursday, followed by the Philly Fed Manufacturing Index, Existing Home Sales, and the CB Leading Index. 

Indian Rupee strengthens despite multiple challenges

• India's foreign exchange reserves have risen from $624 billion in January to $654 billion by early March, though they remain $50 billion below their peak in October. 
• The Fed held rates steady at the 4.25%-4.50% range at the March meeting on Wednesday, as widely anticipated. 
• Fed officials still see reducing borrowing costs by half a percentage point by the end of this year due to slowing economic growth and a downturn in inflation.
• Fed Chair Jerome Powell highlighted the high degree of uncertainty from US President Donald Trump’s significant policy changes, adding that the Fed officials can wait for more clarity on the impact of those policies on the economy before acting.
• Powell stated during a press conference, “Labor market conditions are solid, and inflation has moved closer to our 2% longer-run goal, though it remains somewhat elevated.”

 USD/INR keeps the bullish vibe in the longer term 

The Indian Rupee trades on a stronger note on the day. In the longer term, the USD/INR pair maintains its constructive outlook on the daily timeframe. Nonetheless, in the near term, the pair has broken out of a symmetrical triangle, while the 14-day Relative Strength Index (RSI) stands below the midline near 37.00, suggesting that further downside looks favorable. 

The 87.00 psychological level appears to be a tough nut to crack for USD/INR. A decisive break above this level could see a rally to 87.38, the high of March 11, en route to 87.53, the high of February 28.

On the downside, the crucial support level is located at 86.00, the round mark and the 100-day EMA. A breach of the mentioned level could attract some sellers and drag the pair lower to 85.60, the low of January 6.