The Indian Rupee (INR) has maintained a stable performance during Wednesday’s Asian trading session, following a notable rebound in the previous day. Strong sales of the US Dollar (USD) by foreign banks have contributed to the INR’s stability, offsetting some of the downward pressure. However, lingering concerns over persistent foreign capital outflows and elevated crude oil prices keep the outlook for the currency cautious. Geopolitical tensions and forecasts indicating potential slowdowns in India’s economic growth remain as significant factors that could further impact the INR’s value against the USD.
Market participants are anticipating forthcoming economic insights, particularly from the Federal Open Market Committee (FOMC) Minutes set for release later Wednesday. Additionally, key labor market data from the US is expected on Friday, with projections suggesting the addition of 154,000 new jobs for December, while the unemployment rate is likely to hold steady at 4.2%. These reports are expected to shed light on the trajectory of interest rates by the US Federal Reserve.
As the Indian economy grapples with potential slowdowns, a recent estimate indicated a drop in the real GDP growth rate to 6.4% for FY25, markedly lower than the previous 8.2% growth in FY24. Despite the dollar index’s decline, the INR earlier traded around 85.65 before rising USD demand from importers and oil firms pushed it back to 85.72 per dollar.
Interventions by the Reserve Bank of India (RBI) in the foreign exchange market have significantly depleted reserves, reducing them by $65 billion since September 2024. Recent reports indicate a rise in the US Services PMI to 54.1 in December, surpassing expectations, while job openings have also shown a substantial increase, introducing further complexity into the market dynamics.
While the USD/INR pair remains bullish, caution is warranted as the Relative Strength Index (RSI) indicates overbought conditions. The current resistance level is noted at an all-time high of 85.84; if breached, it could attract additional technical buying interest. Conversely, a pullback with sustained trading below 85.60 may trigger further declines towards the next critical support levels.
