INR gains modestly as USD/INR dips from 85.70, market eyes on US data

• USD/INR retreats from intraday peak near 85.70, consolidating around 85.30 at the start of the American session.
• India's Industrial output rose 2.7% in April, with manufacturing output climbing to 3.4%.
• Key US data and India's Q1 GDP are due this week, keeping markets cautious.

The Indian Rupee (INR) is showing a modest strength against the US Dollar (USD) during the North American session on Wednesday, recovering from early losses seen in Asian trading hours after USD/INR touched an intraday peak near 85.70.

At the time of writing, the USD/INR pair is consolidating below the previous day's high, trading around 85.30 ahead of the American session. The initial uptick in USD/INR was driven by a steady US Dollar, buoyed by upbeat US Consumer Confidence data and improved risk sentiment as trade tensions ease. However, rising crude oil prices and a negative bias in domestic equities continue to exert pressure on the Indian Rupee.

On the data front, India's Industrial output expanded by 2.7% YoY in April, easing slightly from a 3.0% rise in March but still exceeding market forecasts of 2.0%. Manufacturing output rose by 3.4%, up from 3.0% in the prior month and above expectations of 3.0%, signaling steady momentum in the industrial sector. Despite the stronger-than-expected figures, the USD/INR pair showed limited reaction, with market participants likely staying cautious ahead of key US economic releases.

According to Jateen Trivedi, VP Research Analyst - Commodity and Currency at LKP Securities, the Rupee traded largely flat as the US Dollar Index (DXY) remained steady. 

"With major economic data lined up this week -- including the US Fed Meeting Minutes, Q1 GDP, and core PCE Price Index -- the Rupee's trajectory will largely be guided by foreign fund activity in the secondary markets," he wrote. "In the near term, the Rupee is expected to move within a range of 84.80 to 85.75." 

Looking ahead, India is scheduled to release its Gross Domestic Product (GDP) data for the first quarter on Friday. Economists expect the economy to expand by 6.7% YoY, accelerating from the 6.2% growth recorded in the previous quarter, driven by resilient domestic demand and improving rural consumption.