The Indian Rupee (INR) showed signs of recovery during Thursday’s session, bouncing back from recent pressures. The rebound can be attributed to the selling of US Dollars by public sector banks, likely acting on behalf of the Reserve Bank of India (RBI), which helped to stabilize the currency amidst volatile market conditions. Nonetheless, ongoing demand for USD at month-end, position settlements in the non-deliverable forwards (NDF) market, and a generally cautious market sentiment continue to pose challenges for the INR.
As market participants await the release of the advanced US Gross Domestic Product (GDP) data for the fourth quarter, along with key figures such as weekly Initial Jobless Claims and Pending Home Sales, attention remains focused on broader economic indicators. Additionally, India will unveil its Federal Fiscal Deficit figures on the following day, which could further impact market dynamics.
Foreign investors have pulled out nearly $9 billion from Indian equities and bonds in January alone, causing concern over capital inflows. The Federal Reserve decided to maintain its overnight borrowing rate within a range of 4.25% – 4.50%, with expectations for future rate adjustments depending on tangible indicators of inflation or labor market weaknesses. The current economic environment, influenced by trade tariffs and regulatory policy changes, keeps investors on edge as they assess potential risks.
While the INR has been trading positively, the USD/INR exchange rate remains confined to a narrow range. Technical indicators show a supportive trend above the 100-day Exponential Moving Average (EMA) and a 14-day Relative Strength Index (RSI) of around 64.05, suggesting continued upward potential. Traders are closely monitoring the resistance level at an all-time high of 86.69, with any gains beyond this point possibly leading towards the psychological barrier of 87. On the downside, critical support levels stand at 86.31 and 86.14, indicating significant levels if downward pressure persists.
