The Indian Rupee is facing pressure due to significant outflows from its equity market, where foreign institutional investors have divested around $10 billion in Indian stocks this October. This surge of selling has surpassed the previous record of $8.35 billion in March 2020. Despite the Rupee’s relative stability against the US Dollar, market watchers have observed that interventions by the Reserve Bank of India (RBI) have helped to restrict the potential rise of the USD/INR currency pair.
In the backdrop of these financial dynamics, Indian Prime Minister Narendra Modi recently engaged in discussions with Russian President Vladimir Putin during the BRICS Summit, where he expressed India’s commitment to fostering peace in Ukraine and readiness to mediate a resolution to the conflict. Following this meeting, Modi is also set to meet with Chinese President Xi Jinping, which could further influence market sentiment.
The US Dollar has gained ground, driven by an increase in Treasury yields and prevailing risk aversion among investors. The 2-year and 10-year US Treasury bonds are currently yielding 4.04% and 4.21%, respectively. Market predictions indicate a 91% likelihood of a modest 25-basis-point rate cut by the Federal Reserve, with no expectations for more aggressive cuts in the near term.
Additionally, the Reserve Bank of India’s Deputy Governor emphasized the importance of strengthening macroeconomic fundamentals to navigate global challenges. The central bank has been actively increasing its foreign exchange reserves, now approximating a full year’s worth of imports, which is seen as a buffer against external shocks.
Amid these developments, the USD/INR pair has been observed trading above the 84.00 level, consolidating within a bullish ascending channel. The relative strength index suggests that the momentum remains favorable for the Dollar against the Rupee. Market analysts are eyeing the all-time high of 84.14, while immediate support is noted around the 84.02 level, aligning with the channel’s lower boundary.
