The Indian Rupee (INR) is facing downward pressure during Friday’s Asian trading session, primarily due to a combination of weak domestic equities and increasing crude oil prices. The currency fell to record lows earlier in the week, exacerbated by sustained outflows from foreign funds. Analysts are closely watching the US economic indicators, particularly the advanced Michigan Consumer Sentiment data for November, along with an upcoming speech by a Federal Reserve official, as these factors could impact global markets.
In recent weeks, foreign investors have withdrawn over $1.5 billion from Indian equities in November alone, following significant outflows of $11 billion in the previous month. Despite this trend, some reports suggest that India may be in a relatively strong position compared to its Asian counterparts, largely due to lower reliance on trade with China. On Thursday, the Federal Reserve announced a reduction of its benchmark overnight borrowing rate by 25 basis points to a range of 4.50% – 4.75%, indicating a potential shift in monetary policy amid slowing inflation.
Market sentiment in the US has suggested a growing likelihood of a quarter-point rate cut in December, with estimates indicating the probability has climbed above 68%. In contrast, the likelihood of a pause in rate changes is approximated at nearly 32%. Additionally, initial jobless claims released by the US Department of Labor for the week ending October 25 showed an increase to 221,000 claims, aligning with predictions and reflecting a slight rise from prior figures.
From a technical perspective, the outlook for the USD/INR exchange pair remains bullish, with the price maintaining levels above the key 100-day Exponential Moving Average. However, indicators point to an overbought condition, suggesting potential consolidation before any significant appreciation might occur. A breakout above the current trend channel could see the currency reaching new resistance levels, while a decline past established support zones might trigger further selling pressure.
