The Indian Rupee (INR) experienced a decline during the Asian trading session on Tuesday, reflecting ongoing challenges in the local financial landscape. Weighing heavily on the currency are persistent outflows from domestic equities, coupled with a lackluster performance in the Indian stock market. The renewed demand for the US Dollar, particularly from oil companies and foreign banks, further exacerbates the pressure on the rupee, keeping it near historical lows.
Despite these challenges, the extent of the INR’s depreciation may be moderated by a slide in crude oil prices, as well as potential intervention from the Reserve Bank of India (RBI). Traders are keenly awaiting key economic indicators, particularly the October Consumer Price Index (CPI), which is anticipated to provide insights into inflation trends. Additionally, the market will be attentive to remarks from various members of the Federal Reserve, whose discussions could influence foreign exchange dynamics and investor sentiment.
Recent trends reveal that foreign investors have withdrawn over $2.5 billion from Indian equities this November, which adds to the substantial outflow of $11 billion seen in October. The outflow trend has raised concerns about the rupee’s volatility, with market analysts suggesting that it might stabilize within the range of 83.80 to 84.50, mainly due to the RBI’s capacity to manage the currency with its foreign exchange reserves.
Looking ahead, the rupee might face a potential decline of 8% to 10% against the US dollar, especially if political changes, such as a possible return of a former administration in the United States, come into play. The expected rise in India’s October CPI to 5.80% year-on-year could also impact market perceptions. The USD/INR pair is currently maintaining a strong upward trajectory, with significant levels of resistance and support that traders will monitor closely in the near term.
