The Indian Rupee (INR) is experiencing continued weakness in the Asian session on Tuesday, following its conclusion at a historic low in the previous trading day. The local currency is under pressure from ongoing foreign capital outflows, driven by uncertainties surrounding both the upcoming US presidential election and the Federal Reserve’s interest rate decision later in the week. Investors are closely monitoring these developments for signs of market direction.
As the Rupee declines, there are expectations that the Reserve Bank of India (RBI) may intervene in the foreign exchange market by selling US Dollars to help stabilize the INR. Market participants are particularly focused on the election outcome, which may take days to determine, and a monetary policy meeting set for Thursday that could impact liquidity and interest rates.
Recent reports indicate a slight improvement in domestic manufacturing, with the October Purchasing Managers Index (PMI) rising to 57.5 from a previous low of 56.5 in September, surpassing early estimates. This data suggests that operational conditions in India’s manufacturing sector are improving, which could provide some support for economic sentiment amidst the current volatility.
On the global stage, estimates from the International Monetary Fund indicate that India is on a trajectory to surpass Japan as the world’s fourth-largest economy by fiscal year 2025, with GDP projected to reach $4,340 billion in the next fiscal year. In light of recent developments, market participants see a high probability of a quarter-point interest rate reduction by the Federal Reserve, with expectations rising for subsequent cuts.
From a technical standpoint, the USD/INR currency pair maintains a positive bias, remaining supported above the 100-day Exponential Moving Average (EMA). Key resistance is identified at the trend channel’s upper boundary at 84.25, while a breakdown below 84.05 could increase selling pressure toward the 100-day EMA at 83.78.
