India PMI Slips in June but Stays Expansionary — USD/INR Holds Near 94.65 as Dollar Dominates

India's business activity expanded at a slightly slower pace in June, according to preliminary PMI data released Tuesday by S&P Global and HSBC Bank, though readings across all three sectors remain firmly in expansionary territory. The rupee showed little reaction, with USD/INR holding near 94.65 as the broader dollar narrative continues to dominate INR direction.

PMI Readings: Still Healthy, But Losing Momentum

India's HSBC Manufacturing PMI eased to 54.5 in June from 55.0 in May — a modest deceleration but still comfortably above the 50.0 threshold that separates expansion from contraction. The services sector saw a sharper pullback, with the Services PMI declining to 57.3 from 59.8, while the Composite PMI — which captures the combined picture of manufacturing and services — fell to 57.4 from 59.3.

All three readings remain well above 50, signaling that India's private sector economy continues to expand at a healthy clip. The softening, however, is broad-based across sectors, suggesting that the peak momentum seen in May may be fading heading into the second half of 2025.

What This Means for the RBI and the Rupee

India's PMI data carries a dual implication for monetary policy. Strong readings reduce the case for Reserve Bank of India (RBI) easing by signaling robust economic momentum and potential inflationary pressure from factory activity. A deceleration of the kind seen in June, while not alarming, marginally shifts the probability toward a more accommodative RBI stance if the trend continues in subsequent months.

In practice, Tuesday's data had minimal immediate impact on USD/INR. The pair held steady near 94.65, reflecting a market where the dollar's macro momentum — driven by Fed hawkishness and geopolitical safe-haven demand — is overwhelming India-specific data signals. With the US dollar gaining against the Australian Dollar (+0.45%) and New Zealand Dollar (+0.28%) on the day while holding flat against most majors, the rupee's relative stability near current levels reflects more about dollar consolidation than INR strength.

Technical Picture: USD/INR Bias Remains Constructive

The technical structure on the USD/INR daily chart supports a cautiously bullish near-term view for the pair, and by extension continued pressure on the rupee. Price is trading at 94.6550, holding above the 100-day SMA at 93.54 — a level that has consistently underpinned the broader uptrend. The pair also remains above the lower Bollinger Band near 94.16, suggesting the recent pullback from late-May highs is a consolidation within the existing bullish structure rather than a trend reversal. The 14-day RSI near 45 reflects neutral momentum after prior overbought readings unwound, leaving room for the uptrend to resume without immediate exhaustion risk.

To the upside, the 20-day SMA at approximately 95.14 is the first meaningful resistance. A daily close above that level would reopen the path toward the upper Bollinger Band near 96.11. On the downside, 94.16 is immediate support, with the 100-day SMA at 93.54 acting as the deeper structural floor — a sustained break below that level would materially weaken the prevailing bullish bias.

Southeast Asia Trader Perspective

For regional traders, India's PMI trajectory carries broader EM implications. A sustained deceleration in Indian activity data over coming months could accelerate RBI easing expectations, adding fundamental downside pressure to INR on top of existing dollar strength headwinds. Traders monitoring USD/INR should watch whether June's PMI softening proves temporary or marks the beginning of a more sustained momentum shift heading into Q3 2025.

Trader Takeaway: USD/INR's near-term bias remains bullish above the 100-day SMA at 93.54. India's PMI deceleration is not yet alarming but warrants monitoring. The primary driver remains the dollar — watch Thursday's US PCE print for the next meaningful catalyst on USD/INR direction.

Sources: S&P Global, HSBC Bank, FXStreet, CME FedWatch Tool, Federal Reserve June 2025 Statement