The Indian Rupee (INR) is maintaining stability against the US Dollar (USD), trading within a narrow band of 84.00 to 84.10. Recent market interventions by the Reserve Bank of India (RBI) have mitigated some downward pressures, despite persistent foreign capital outflows. Foreign Institutional Investors (FIIs) continued to divest from Indian equities for the 18th straight session, reallocating their investments towards Chinese markets, which have become appealing due to recent stimulus measures and more attractive valuations. The National Stock Exchange’s Nifty 50 index has seen a decline of approximately 1.7% over the past three trading sessions, falling about 6% from last week’s all-time highs, primarily due to disappointing corporate earnings reports.
In a significant diplomatic development at the BRICS summit in Russia, Indian Prime Minister Narendra Modi and Chinese President Xi Jinping engaged in their first formal discussions in five years. Their agreement to strengthen communication and cooperation signals a potential thaw in relations strained since a military clash in 2020. Traders are also looking forward to the forthcoming HSBC Purchasing Managers Index (PMI) data, a key gauge of business activity in India, scheduled for release on Thursday, along with Indian foreign exchange reserves figures set to be disclosed on Friday.
Meanwhile, the US Dollar has experienced downward pressure following the release of the Federal Reserve’s Beige Book, which revealed that economic activity remained mostly unchanged across the country. The likelihood of a 25-basis-point rate cut has risen dramatically, with market indicators showing an 88.9% probability of this outcome, while expectations of larger rate reductions have diminished.
Former economist Jim O’Neill discussed the BRICS alliance’s capacity to challenge the dominance of the US Dollar, asserting that unity between China and India is essential for any substantial progress. RBI Deputy Governor Michael Patra emphasized the importance of bolstering macroeconomic fundamentals as a protective measure against global risks, highlighting the central bank’s strategy to fortify its foreign exchange reserves.
Amid these economic developments, forecasts suggest that the USD/INR pair may encounter resistance at approximately 84.14, its previous peak, while support rests near the 84.00 level. Current technical trends indicate a slight bullish bias for the exchange rate, as indicated by recent momentum indicators.
