The Indian Rupee (INR) is experiencing a decline in the early hours of Wednesday amid rising pressure from sustained portfolio outflows and escalating geopolitical risks. Increased demand for the US Dollar (USD) from importers and heightened tensions following recent developments in Ukraine are significantly influencing this trend. Russian assertions that Ukraine utilized US ATACMS missiles to target Russian territory, coupled with President Vladimir Putin’s endorsement of a new nuclear doctrine, have intensified concerns. Nevertheless, the Reserve Bank of India (RBI) is anticipated to intervene through USD sales to mitigate pronounced depreciation of the Rupee.
With no major economic data emerging from either the US or India recently, the dynamics of USD pricing will play a crucial role in determining the direction of the INR. Notably, the speeches from Federal Reserve members later today are highly anticipated by the market and may impact investor sentiment.
Market analysts are observing that while the Indian Rupee faces weakness, moderate movements in the dollar may not significantly strengthen the INR. It has been suggested that a substantial decline in the dollar index could potentially yield a slight appreciation in the Rupee.
Looking forward, foreign portfolio investments (FPI) in India are expected to remain stable, with forecasts of USD 20 – 25 billion in inflows for the fiscal year 2025. Investor expectations regarding interest rate cuts have shifted significantly, with projections for a 25 basis point reduction at the upcoming December meeting dropping sharply.
Despite the downward trajectory of the Rupee, the overall outlook for the USD/INR pair remains constructive, supported by technical indicators and maintaining a position above key support levels. Immediate resistance is noted at the all-time high of 84.45, with prospects of reaching the psychological mark of 85.00 if this level is breached. Conversely, a dip below 84.35 may stir selling interest and revert the pair toward the 84.00-83.90 range, highlighting critical support levels to watch.
