The Indian Rupee has shown signs of recovery during Monday’s trading session in Asia, regaining some ground after hitting a record low in previous sessions. The move is largely attributed to ongoing interventions by the Reserve Bank of India, which has been supplying US Dollars to stabilize the currency. While the Indian Rupee is making a slight comeback, pressures from a stronger US dollar, significant foreign capital outflows, and rising oil prices may pose challenges for the currency’s ongoing strength.
Economic data from the US has had a notable impact on the rupee’s trajectory. Strong employment figures released last Friday indicated that the US Nonfarm Payrolls rose by 256,000 in December, surpassing expectations. This performance has fueled speculation that the US Federal Reserve may not reduce interest rates as aggressively as previously anticipated, consequently bolstering the Greenback. Given India’s position as the world’s third-largest consumer of oil, escalating crude prices could further create downward pressure on the Indian economy and its currency.
Traders are now focused on India’s Consumer Price Index (CPI) data, with projections indicating a year-on-year increase of 5.3% for December. This data release is critical as it could shape future monetary policy and influence market sentiment. In the broader context, analysts have suggested that the Indian Rupee might see depreciation past 90 per dollar later in the year if the Reserve Bank prepares to abandon its indirect peg to the USD.
As the day unfolds, the USD/INR exchange rate continues to show an upward trend, maintaining levels above the 100-day Exponential Moving Average. However, the 14-day Relative Strength Index indicates that the currency pair might be overbought, suggesting a potential consolidation phase could be on the horizon. The immediate resistance is identified at the record high of 86.15, while initial support is seen at 85.85. If bearish sentiments prevail, further declines could take the rupee to 85.65 and possibly down to the psychological support level of 85.00.
