The Indian Rupee (INR) experienced a decline during Thursday’s trading session as the US Dollar (USD) regained strength following a period of increased liquidity in the Indian market. Despite this weakening of the INR, potential downward movement may be restrained due to the recent 50-basis point rate cut by the US Federal Reserve, which is expected to continue affecting the USD. Additionally, ongoing investment from Foreign Institutional Investors (FIIs) into Indian equities could offer further support to the local currency. However, fluctuations in crude oil prices, which could negatively impact the INR, remain a concern, particularly as India ranks as the third-largest oil consumer globally, trailing only the US and China.
The outlook for the INR suggests that its recent losses may not be critical, especially in light of assurances from the Reserve Bank of India (RBI) regarding the stability of its benchmark policy rate amidst ongoing food inflation concerns. Economic growth assessments from government officials indicate that India is poised for robust performance on the global stage in the years ahead.
Meanwhile, the recent decision by the Federal Open Market Committee to implement the first rate cut in over four years reflects a shift in monetary policy aimed at sustaining economic and labor market confidence. In conjunction with adjusting their economic forecasts, Fed policymakers have signaled a slight uptick in expected unemployment rates through 2024.
From a technical perspective, the performance of the USD/INR currency pair has hit a critical threshold, now testing its 100-day Exponential Moving Average (EMA). Should the pair slip below this average, it may indicate a return to a downward trend. The support level at 83.64 is pivotal, with potential breaches leading to further declines towards previous lows. Conversely, resistance levels cap the upward movement, particularly around 83.75 and the significant barrier at 83.90-84.00.
