The Indian Rupee (INR) remained stable during the Asian trading session on Tuesday, despite encountering significant headwinds. The local currency’s resilience is being tested by broader declines in other Asian currencies, ongoing foreign capital flight, and a robust US Dollar (USD). The previous session saw the INR dip to an all-time low, and while it has managed to hold its ground since then, the outlook remains precarious. Market observers note that interventions by the Reserve Bank of India (RBI) may provide some support against further depreciation.
Looking ahead, all eyes are set on the upcoming US Consumer Price Index (CPI) report for November, scheduled for release Wednesday. This report is anticipated to be a pivotal factor influencing the Federal Reserve’s monetary policy, especially concerning a potential third consecutive rate cut. Meanwhile, domestic attention will turn to the CPI inflation figures set to be revealed on Thursday, reflecting the Indian economic landscape.
The INR is under pressure from various challenges, yet some analysts foresee stability around current levels with a potential bias toward depreciation. Recent initiatives by the RBI aimed at attracting foreign investment, coupled with a manageable current account deficit, may offer medium-term support for the currency.
In terms of the larger economic picture, India’s foreign exchange reserves have increased by $1.51 billion, reaching $658.09 billion as of late November. This rise offers a degree of comfort against external shocks. However, the RBI has adjusted its real GDP growth forecast for the fiscal year downward from 7.2% to 6.6%, reflecting a more cautious economic outlook.
Market sentiment regarding upcoming Federal Reserve actions continues to evolve. Following the release of employment data, commentaries highlighted the robust state of the US job market. Currently, market expectations suggest a high probability of a 25 basis points rate cut at the Fed’s next meeting in mid-December.
As for the USD/INR exchange rate, the outlook appears favorable from a longer-term perspective. The pair’s consistent trading above the 100-day Exponential Moving Average indicates underlying strength. However, an overbought condition, as indicated by the Relative Strength Index, suggests that a period of consolidation may occur before any significant upward movement is witnessed. Immediate resistance for the USD/INR stands at 84.86, with psychological levels beyond that potentially serving as targets if the current trend persists. Conversely, trading below 84.61 could signal a shift toward bearish sentiments, with support levels monitored closely.
