The Indian Rupee (INR) faced pressure early in the Asian trading session on Monday, as it continued to weaken against the US Dollar. The ongoing strength of the US Dollar, largely fueled by the Federal Reserve’s strict monetary policy, has negatively impacted emerging market currencies, including the INR. Investors are closely monitoring upcoming economic indicators, particularly the US Consumer Confidence report set to be released later in the day.
The Reserve Bank of India (RBI) may intervene in the foreign exchange markets to stabilize the INR by selling USD, a tactic that could mitigate some of the losses for the currency in the short term. In addition to the Consumer Confidence report, the Chicago Fed’s National Activity Index and US Durable Goods Orders data are also expected to come out in the following days, which may influence market sentiment and the performance of the INR.
India’s foreign exchange reserves have been on a declining trend, diminishing in nine of the last ten weeks and reaching a multi-month low. This downturn follows a peak of USD 704.89 billion in September when reserves were at an all-time high, and the latest figures show reserves have fallen to USD 654.857 billion, according to RBI data. The decline is attributed to a growing trade deficit coupled with sluggish growth, leading to capital outflows from domestic equity markets.
Technical analysis indicates that the USD/INR pair continues to show a strong bullish trend, remaining above the 100-day Exponential Moving Average (EMA). Current levels suggest that 84.70 could act as a key support base, while resistance is expected around 85.20, with additional upside potential towards 85.50. Conversely, should the pair break below 84.88, it may signal further declines towards the 100-day EMA at 84.19. Overall, the outlook for the INR remains challenging in light of these economic indicators and market dynamics.
