The Indian Rupee (INR) experienced a stable session on Tuesday, maintaining a narrow trading range following a decline to a closing low in the previous day. This stagnation is influenced by rising US Treasury bond yields and a depreciating Chinese Yuan, which create a challenging environment for the local currency. The expanding merchandise trade deficit reported for India in November further intensifies the pressure on the INR.
Despite the potential for significant declines, support from the Reserve Bank of India (RBI) is likely to mitigate excessive volatility. The RBI is expected to intervene by selling US dollars through state-owned banks as a means to stabilize the Rupee. Market participants are also looking ahead to the release of US November Retail Sales data and the Federal Reserve’s interest rate decision, both of which could influence trading dynamics in the coming days.
Recent economic data from India indicates a decrease in wholesale price inflation, falling to 1.89% in November, down from 2.36% in October, surpassing market expectations. Furthermore, the Manufacturing Purchasing Managers Index (PMI) rose to 57.4 in December, reflecting a positive outlook driven by gains in production and new orders. The Services PMI also recorded an increase, hitting 60.8, while the Composite PMI jumped to 60.7, signaling robust economic activity.
In the broader context, the US has reported a rise in its S&P Global Composite PMI, climbing to 56.6, alongside a growing Services PMI indicating steady economic growth. Although the Manufacturing PMI saw a slight dip, these figures reflect an overall resilient economic environment.
Currently, the INR remains flat against the dollar, with technical indicators suggesting strong buyer support. The USD/INR pair is holding above the significant 100-day Exponential Moving Average (EMA), with an ascending trend channel posing a challenge to bullish momentum. Traders are closely monitoring key levels, with potential targets set between 84.80 and 85.50, highlighting the focus on the upcoming central bank decisions and economic data releases.
