The Indian Rupee experienced a decline during Thursday’s Asian trading hours, influenced by ongoing foreign investor outflows, increasing demand for the US Dollar, and prevalent economic uncertainties. The local currency is under pressure due to continuous selling by Foreign Institutional Investors and demand from importers. Investors are closely monitoring the upcoming US weekly initial Jobless Claims data, which may further impact market sentiment.
Despite the INR’s depreciation, a reduction in crude oil prices could mitigate some of its losses. As the world’s third-largest oil consumer, India’s economic health is closely tied to oil prices. The Reserve Bank of India is expected to intervene through dollar-rupee swaps to manage liquidity, providing a buffer for the rupee. Additionally, the market anticipates the release of January’s Purchasing Managers Index data from both HSBC India and the US S&P PMI, which may offer further insights into economic activity.
The rupee’s ongoing weakness occurs amidst increasing global challenges. In a bid to enhance financial inclusion, regulatory authorities are proposing sachet-sized investment options aimed at encouraging systematic savings and attracting novice investors to the Mutual Fund sector. Meanwhile, the government is set to raise significant subsidies by 8% year-on-year, totaling approximately 4.1 trillion rupees, according to official sources. The national budget is scheduled for presentation on February 1 amid slower growth and others factors affecting India’s economy.
In January alone, foreign investors have offloaded around $6.5 billion in local equities and bonds, marking the largest monthly outflow since late 2023. Currency trends indicate a persistent bullish sentiment for the USD/INR pair, as it continues to trade above the critical 100-day Exponential Moving Average. Key resistance for this pair stands at an all-time high of 86.69, while support levels to monitor include 86.18 and further downward points. This dynamic presents both challenges and opportunities in the currency market for stakeholders.
