The Indian Rupee (INR) experienced a decline in the initial trading session of the week, attributed to a robust US Dollar (USD) and concerns surrounding the deceleration of domestic economic growth. The ongoing depreciation of the Chinese Yuan, heightened demand for the USD from local importers and oil companies, as well as worries about slowing growth within India could exert additional pressure on the INR. Nonetheless, interventions by the Reserve Bank of India (RBI) may provide a buffer against substantial losses in the local currency.
Market participants are keenly awaiting the release of the US Consumer Price Index (CPI) for November, scheduled for Wednesday. Analysts anticipate a year-over-year increase to 2.7%, up from 2.6% in October. This upcoming inflation report could potentially serve as a significant consideration for the Federal Reserve, which is contemplating a third consecutive reduction in interest rates. In a similar vein, Indian CPI data will be disclosed on Thursday, offering further insights into domestic inflation trends.
In its most recent meeting, the RBI opted to maintain the benchmark repo rate at 6.50%. Central bank officials underscored the necessity of achieving price stability to lay the groundwork for robust economic growth, reaffirming their commitment to balancing inflation and growth.
On the employment front, the US added 227,000 jobs in November, far surpassing expectations of 200,000, while the unemployment rate inched up to 4.2%. Annual wage inflation remained steady at 4.0%, exceeding market predictions. According to current market analyses, there is a high likelihood of a 25 basis point rate cut by the Federal Reserve at its next policy meeting in mid-December.
As trading persists, the INR maintains a weaker stance against the USD. The positive outlook for the USD/INR pair is bolstered by the price staying well above its 100-day Exponential Moving Average, with technical indicators suggesting further potential for appreciation of the dollar in the near term. Key resistance levels for the USD/INR pair are noted at historical highs of 84.77, with additional psychological barriers at 85.00 and 85.50, while a decline below 84.60 could open the door to 84.22.
