The Indian Rupee (INR) is facing significant downward pressure, nearing an all-time low during the Asian trading session on Thursday. This decline can be attributed to a combination of factors including a strengthening US Dollar (USD), subdued local equity market sentiment, and continued foreign capital outflows. Investors are closely monitoring upcoming communications from the Federal Reserve for insights that may impact market dynamics.
As the INR struggles, it reached a record closing low of 85.8550 on Wednesday, reflecting a 0.2% decline. Significantly, higher crude oil prices are worsening the situation, alongside slowing economic growth projections for India. Estimates suggest that the country’s economic growth rate may drop to a four-year low of 6.4% in FY25, down from a robust 8.2% in FY24. Market analysts from MUFG project that the INR could weaken further to 86.8 per dollar during this quarter, while Citigroup anticipates a dip to 86.35.
In response to the declining currency, the Reserve Bank of India (RBI) may intervene by selling USD to mitigate the INR’s losses. Attention is also focused on forthcoming US employment information, including Nonfarm Payrolls and the unemployment rate, which could provide context for future interest rates. Insights gathered from FOMC minutes indicate that while inflation is expected to ease, there are still concerns about persistent price pressures.
The USD/INR currency pair continues to show strong bullish momentum, trading significantly above its key 100-day Exponential Moving Average (EMA). However, technical indicators such as the 14-day Relative Strength Index (RSI) have entered overbought territory, suggesting that caution may be prudent. Key resistance is identified at the 85.95 – 86.00 range; a sustained breakout above this could lead to a surge towards 86.50. Conversely, initial support is established at 85.65, with potential further declines if this level is breached.
