USD/INR holds gains near 83.50, traders expect the potential for intervention

• USD/INR could test an all-time high of 83.7190 level.
• The Indian Rupee could limit its downside as traders expect potential for intervention by the RBI.
• The US Dollar continues to gain ground due to increased risk aversion.

USD/INR continues to appreciate, trading around 83.60 during the early European session on Friday. The Indian Rupee (INR) has avoided testing an all-time low at 83.7190 against the US Dollar (USD), likely due to anticipated intervention by the Reserve Bank of India (RBI), according to market participants.

The upside of the USD/INR pair can be attributed to the strengthening of the US Dollar amid increased risk aversion. The Greenback is also bolstered as US Treasury yields continue to improve. However, the USD's upside potential may be constrained by soft labor data, which enhances market expectations for a Federal Reserve (Fed) rate cut in September.

US Initial Jobless Claims increased more than expected, data showed on Thursday, adding 243K new unemployment benefits seekers for the week ended July 12 compared to the expected 230K, and rising above the previous week’s revised 223K.

On the INR front, traders are likely awaiting the release of India's FX Reserves (USD) data for the week ending July 8, scheduled for Friday. Additionally, attention is focused on the Union Budget 2024-25, which will be presented to parliament next week.

Earlier this week, the International Monetary Fund (IMF) revised its economic forecast for India, now projecting a growth rate of 7% for this year, up from the 6.8% forecast in April. This adjustment is attributed to stronger consumer spending in rural areas.