The Indian Rupee (INR) showed signs of recovery during Friday’s early trading session, after hitting an all-time low in the previous session. Despite this slight rebound, the local currency remains vulnerable due to a strong US Dollar (USD), an increase in crude oil prices, and a continued outflow of foreign capital. Ongoing selling pressure in the domestic equity markets is further contributing to the INR’s challenges.
Market analysts anticipate intervention from the Reserve Bank of India (RBI) to stabilize the currency and prevent further depreciation. Investors are also keeping a close watch on significant economic data releases coming later on Friday, including Indian Industrial Output and Manufacturing Output for November. Concurrently, the U.S. labor market data for December, notably the Nonfarm Payrolls (NFP), Unemployment Rate, and Average Hourly Earnings, is set to be scrutinized for insights into economic health.
Foreign investment in India’s stock market has seen a dramatic decline, with approximately $2 billion withdrawn since the year began. Nonetheless, projections for India’s economic growth remain optimistic, with estimates suggesting a potential growth of 6.6% in 2025 according to a recent UN report.
Comments from various Federal Reserve officials indicate a cautious approach towards future interest rate cuts amid uncertainty in the economic landscape. Some members expressed the need to slow the pace of cuts in response to evolving data, while others emphasized waiting for clear signs of a decline in inflation before making any moves.
Currently, the INR is trading at an improved level, supported above the pivotal 100-day Exponential Moving Average (EMA). Though the USD/INR pair may have upward momentum, the Relative Strength Index (RSI) shows overbought conditions, hinting at possible consolidation before any significant appreciation. The first resistance for this pair is identified at the 85.95 – 86.00 range, with a breakthrough potentially leading to targets around 86.50, while initial support lies at 85.65.
