The opened marginally higher by 2 paise at 95.61 against the US dollar on Wednesday, 13 May, supported by the government’s decision to raise import duties on gold and silver. However, gains are likely to remain capped amid elevated oil prices and rising US inflation.
India has recently raised import tariffs on and from 6% to 15% to reduce demand and alleviate pressure on the currency, which has been impacted by a rise in crude oil prices due to the conflict with Iran.
The increased tariffs are expected to reduce imports of precious metals, help reduce the trade deficit, and support the rupee, which has depreciated by over 5% since the conflict’s onset. India remains the second-largest consumer of gold and silver globally.
This decision also aligns with Prime Minister Narendra Modi’s call for citizens to cut back on gold purchases to protect foreign exchange reserves.
India’s retail inflation inched up to 3.48% in April from 3.40% in March, marking the sixth consecutive monthly rise, though it remained below expectations of 3.80%. They note that food inflation rose to 4.2% from 3.87%, indicating that price pressures in essential items are gradually building.
Despite this, analysts believe the softer-than-expected headline print gives the RBI some room to keep interest rates on hold in the near term.
Globally, experts point out that the inflation narrative has shifted, particularly in the US, where price pressures have picked up. Headline inflation rose to 3.8%, the highest since 2023, while core inflation climbed to 2.8%, both exceeding expectations. This suggests that the recent oil price surge linked to the Iran conflict is feeding into global inflation.
For emerging markets like India, analysts caution that persistently high US inflation could delay Federal Reserve rate cuts, keeping the dollar firm and adding pressure on oil-importing economies.
Market participants are also closely tracking developments surrounding Donald Trump’s visit to Beijing for talks with Xi Jinping, during which discussions are expected to cover trade dynamics and geopolitical tensions involving Iran.
Rupee Outlook
Amit Pabari, MD, Research Team, CR Forex Advisors, said that in an economy heavily dependent on imported commodities, every ounce of gold and every barrel of oil has now become part of the currency story. Technically, the 94.50–94.80 zone is expected to act as a strong support area for USDINR, while 95.70–95.80 remains a crucial resistance region for the pair.
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