Indian Rupee Ticks Lower As RBI Leaves Repo Rate Unchanged At 5.25%, As Expected

The Indian Rupee faces marginal selling pressure against the US Dollar (USD) after the Reserve Bank of India’s (RBI) monetary policy decision; however, the USD/INR pair is still marginally lower at around 95.70.

As expected, the RBI has left its Repo Rate steady at 5.25%, with a warning that adverse implications of the extended disruption in global supply chains and higher energy prices have prompted risks both to inflation and growth. However, RBI Governor Sanjay Malhotra has stated that the headline inflation is still below the central bank’s target and the core inflation is much lower, excluding precious metals.

Regarding the monetary policy outlook, RBI Governor Malhotra has guided that it is “prudent to wait for greater clarity to emerge” and the central bank will remain “data-dependent”.

Meanwhile, the RBI has raised retail inflation forecast for the Financial Year (FY) 2026-27 to 5.1% from 4.6% previously anticipated.

Geopolitical tensions to remain a key drag on Indian Rupee

Continued hostilities between Israel and Lebanon despite the United States (US)-brokered ceasefire continue to escalate US-Iran deal uncertainty.

Hezbollah chief Naim Qassem has rejected the ceasefire deal as a “farce”, warning that northern Israel will remain a target for fighters as long as Israel continues to bomb Lebanon, AlJazeera reported.

Ongoing Israel-Lebanon attacks could result in a resumption of oil prices’ rally, a scenario that will be unfavorable for currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs.

Investors await US NFP data

Later in the day, investors will pay close attention to the US Nonfarm Payrolls (NFP) data for May, which will be published at 12:30 GMT. The US official employment data will influence market expectations for the Federal Reserve’s (Fed) monetary policy outlook.

The US NFP report is expected to show that employers hired 85K fresh workers, lower than 115K in April. The Unemployment Rate is seen steady at 4.3%.

Year-on-Year (YoY) Average Hourly Earnings, a key measure of wage growth, is estimated to arrive lower at 3.4% from the previous reading of 3.6%. On a monthly basis, the wage growth measure is expected to have grown 0.3% faster than 0.2% in April.

Technical Analysis: USD/INR holds above 20-day EMA

USD/INR trades marginally lower at around 95.70 at press time. The pair maintains a constructive bullish bias as spot remains above the 20-period Exponential Moving Average (EMA) at 95.4910.

The bounce from last week’s lows has kept the pair supported by this short-term trend indicator, while the 14-period Relative Strength Index (RSI) near 55 points to mildly positive, but not overstretched, momentum.

On the downside, immediate support is located at the 20-period EMA around 95.49, where buyers are likely to defend the short-term uptrend; a daily close below this area would suggest a deeper corrective move towards 95.00, while the May 7 low around 94.00 will remain key support zone. Looking up, the pair could aimd to revisit the all time high slightly above 97.00 if it manages to rise above the June 4 high at 96.30