The Indian Rupee (INR) is encountering challenges as it hovers near its historical lows, primarily driven by notable foreign selling in Indian equities. This trend has been exacerbated by increasing geopolitical tensions in the Middle East, which have put pressure on risk-sensitive assets. While the Reserve Bank of India (RBI) may intervene in the currency market to stabilize the rupee by selling US dollars, it remains to be seen how effective these measures will be against the backdrop of persistent foreign outflows.
On Tuesday, the INR demonstrated some resilience against the US Dollar (USD), largely attributed to the anticipation of potential RBI interventions. However, the outflow of foreign investments from Indian stock markets is expected to continue as investors are drawn towards China, which is currently benefiting from favorable stimulus policies and more attractive valuations. As a result, the outlook for the rupee appears shaky, especially considering the significant $10 billion in stock sales by foreign institutional investors recorded in October alone.
Prime Minister Narendra Modi’s attendance at the upcoming BRICS Summit in Kazan is also a key development. Modi is expected to engage in significant dialogues with counterparts including Russian President Vladimir Putin and Chinese President Xi Jinping, which could influence not just bilateral ties but also trade dynamics affecting the rupee.
Adding pressure on the INR is the strengthening of the USD, buoyed by rising US Treasury yields, which climbed over 2% recently. This uptick reflects ongoing economic resilience in the United States and growing inflation concerns, fueling expectations of tightened monetary policy. Currently, market sentiment anticipates a 25-basis-point interest rate cut by the Federal Reserve in November, but broader consensus suggests that any monetary easing will be measured.
As the USD/INR exchange rate hovers around 84.10, technical indicators show bullish tendencies, with the pair consolidating in an ascending channel. Immediate resistance is seen at the record high of 84.14 set in early August, while support appears at the 84.01 level, emphasizing the key market thresholds that will shape the rupee’s trajectory in the coming days.
