The Indian Rupee (INR) continued its decline on Tuesday, following a record low reached in the previous session. A surge in demand for the US Dollar (USD) from corporations, likely driven by month-end obligations and concerns over the weakening Chinese Yuan, is exerting additional pressure on the local currency. Contributing to this downward trend is a notable rise in crude oil prices, which affects the INR significantly as India stands as the world’s third-largest oil consumer.
To mitigate the rupee’s losses, the Reserve Bank of India (RBI) has been actively intervening in the foreign exchange market. The central bank has increased forward USD sales to cushion the effects of direct market interventions on liquidity within the banking system and on the country’s foreign reserves. As the trading week approaches a holiday, market activities are expected to be subdued.
On the stock market front, India’s benchmark indexes saw a positive turnaround on Monday, with the Nifty 50 up by 0.7% to 23,753.45 points and the BSE Sensex climbing 0.64% to 78,540.17. This marked an end to a five-day losing streak for both indices. Observations from traders indicated that the RBI likely stepped in to stabilize the currency and prevent further depreciation past the 85.12 level, supported by dollar sales from public sector banks.
In the US, economic indicators fluctuated, with New Home Sales climbing 5.9% to a seasonally adjusted annual rate of 664,000 in November. Revised figures for October showed a robust sales pace, however, Durable Goods Orders in the US fell by 1.1% in November to $285.1 billion, diverging from previous gains and projections.
Despite the INR’s challenges, a resilient outlook for the USD/INR pair remains. The currency pair is currently holding above the important 100-day Exponential Moving Average (EMA), with significant resistance identified at 85.25. If the price can exceed this barrier, further gains could lead towards 85.50 and potentially reach the psychological level of 86.00. Conversely, support is anticipated in the 85.00 – 84.95 range, with indicators suggesting that this level may remain intact barring significant market shifts.
