The Indian Rupee (INR) is showing signs of strength during Wednesday’s Asian trading session, bolstered by a rejuvenated risk appetite and a weakening US Dollar (USD). This sentiment shift follows recent stimulus measures announced by China, which have helped uplift market confidence. However, rising crude oil prices and potential capital outflows related to adjustments in the FTSE equity indexes could pose challenges for the INR. Additionally, significant demand for USD from major Indian importers might lead to further selling pressure on the currency.
Key economic data from the US, including the August New Home Sales and a speech from Federal Reserve Governor Adriana Kugler, could influence the INR’s trajectory. The market is particularly vigilant for any dovish comments that may emerge from the Fed, as these could further weaken the USD against the INR. This week’s highlight will be the release of the August Personal Consumption Expenditures (PCE) Price Index, which is set to provide important insights into inflation trends.
Recent economic assessments have indicated India’s GDP growth forecast holds steady at 6.8%. Analysts suggest that positive sentiment from global risk appetite and the softening of the dollar will likely favor a stronger INR. Nevertheless, there are reservations regarding elevated prices for crude oil and other commodities, which may limit the Rupee’s upside potential.
In other economic news, the US Consumer Confidence Index saw a significant drop, highlighting concerns over inflation that remain above the Fed’s target. This backdrop has led to speculation around potential interest rate adjustments, with market expectations indicating a near-equal divide between a second 50 basis points cut and a more traditional 25 basis points reduction in the upcoming November meeting.
From a technical perspective, the sentiment surrounding the USD/INR pair remains negative, as the Indian Rupee trades favorably against the dollar. The pair’s downward pressure is evident, with critical support levels identified at 83.44 and 83.00 should the prevailing trend continue. The USD/INR pair faces a resistance level at 84.00, with sustained trading above the 100-day Exponential Moving Average indicating a potential shift in market dynamics.
