The Indian Rupee (INR) opened the week on a weaker note, continuing to face selling pressure early in the Asian trading session. Contributing factors include ongoing portfolio outflows and disappointing domestic economic indicators. Market participants are keenly watching for the release of key indicators, specifically the HSBC India Manufacturing PMI and the US ISM Manufacturing PMI, which are set to be announced later today.
Following a notable low reached in the previous trading session, the INR has been adversely affected by a strengthened US Dollar. The recent victory of Donald Trump in the US Presidential election has intensified this trend. Further complicating the situation for the rupee, the Indian economy has reported weaker-than-anticipated Gross Domestic Product (GDP) figures for the July-September quarter, raising concerns about potential stock market sell-offs that could apply additional downward pressure on the currency. Moreover, threats of significant tariffs on BRICS nations, including India, if they pursue initiatives to develop an alternative currency to the US Dollar, have added to the uncertainty surrounding the rupee.
In terms of economic forecasts, the HSBC Manufacturing PMI for November is projected to slip slightly to 57.3 from October’s 57.5. The Reserve Bank of India’s policy decision regarding interest rates is also forthcoming, with speculations suggesting that the central bank will likely maintain the current repo rate in light of ongoing food inflation concerns and a decelerating growth outlook. Recent GDP growth has plummeted to 5.4%, marking a seven-quarter low. The Reserve Bank previously estimated a recovery to 6.8% for the second quarter.
From a technical perspective, analysis of the USD/INR pair shows that it remains positioned above the important 100-day Exponential Moving Average, indicating an overall bullish momentum. Should the pair sustain its upward movement beyond the significant level of 84.55, it might approach the psychological milestone of 85.00. Conversely, if it trades below the trend channel at 84.28, it may see a retreat towards 83.96, and further bearish sentiment could push it down to 83.65, last seen in early August.
