The Indian Rupee (INR) is trading with little movement during Friday’s Asian trading session. After recently bouncing back from its historical low, the INR is finding some stability due to improved conditions in domestic markets. Additionally, the decline in crude oil prices has the potential to bolster the currency. However, the increasing demand for the US Dollar (USD) poses a challenge, which may continue to limit the rupee’s potential for gains.
On this day, the focus is on the Reserve Bank of India (RBI) as it prepares to announce its monetary policy decisions for the 2024-25 financial year. Analysts are particularly attentive to how the RBI’s interest rate decision may influence market dynamics ahead of US employment data, particularly the Nonfarm Payrolls (NFP) figures. Commentary from Federal Reserve officials will also contribute to the prevailing market sentiment.
While there is optimism regarding the Indian economy, concerns about a stronger US Dollar and fears of an economic slowdown have remained prevalent. Market experts suggest that while lower crude prices and foreign institutional investor (FII) outflows may offer the rupee some relief, a persistent negative bias seems likely amidst a buoyant dollar environment.
Predictions for a reduction in the repo rate by the RBI suggest a shift towards accommodating monetary policy, which is driven by signs of weakened growth and a more favorable inflation outlook. This backdrop of cautious outlooks is underscored by the RBI’s recent use of foreign reserves, which have seen a notable decline.
In terms of technical analysis, the USD/INR exchange rate shows long-term bullish potential, although bearish divergence observed in the Relative Strength Index (RSI) may limit significant upward movement in the near term. The resistance level at 84.77 remains a critical challenge for bulls, while support emerges around the 84.60 level, indicating key levels traders will be watching closely in the coming days.
