The Indian Rupee (INR) saw a recovery in early European trading on Monday after hitting an all-time low in the previous session. Concerns over heightened oil prices due to geopolitical tensions, significant foreign investor sell-offs, and increased demand for the US Dollar all contributed to the depreciation of the INR. However, potential intervention from the Reserve Bank of India (RBI) through US Dollar sales by state-run banks may help limit the downside for the INR. Traders are closely watching India’s Wholesale Price Index (WPI) Inflation data for September, which is expected to rise to 1.90% YoY. On the US front, the NY Empire State Manufacturing Index for October will also be released.
According to Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas, the Indian Rupee dropped below the 84 per US Dollar mark for the first time, driven by demand from foreign banks, FII outflows, and surging crude oil prices. Weak domestic markets also put pressure on the Rupee. The US Producer Price Index (PPI) rose 1.8% YoY in September, slightly lower than the 1.9% increase in August but above market expectations. The core PPI also surpassed analysts’ forecasts by climbing 2.8% YoY. The US University of Michigan Consumer Sentiment Index for October fell to 68.9 from 70.1 in September. The FedWatch Tool shows increased odds for a 25 bps rate cut by the Fed as a response to the latest PPI data.
Technically, the USD/INR pair remains positive as it trades above the ascending trend line and the key 100-day Exponential Moving Average (EMA) on the daily timeframe. The 14-day Relative Strength Index (RSI) suggests an uptrend continuation with potential resistance at the all-time high of 84.15 and 84.50. The initial support level lies at 83.90, followed by the 100-day EMA at 83.69 and 83.00. The RBI plays a crucial role in maintaining price stability and growth by closely monitoring inflation rates and adjusting interest rates to support the Rupee. In addition, the RBI actively intervenes in the FX market to regulate the exchange rate and protect importers and exporters from currency risks.
Overall, the Indian Rupee’s performance in the global market remains subject to various factors such as oil prices, foreign investor behavior, and economic data releases. The RBI’s interventions and monetary policy decisions play a pivotal role in stabilizing the Rupee against external pressures. Traders will closely monitor upcoming economic indicators and central bank actions to gauge the future direction of the INR. Despite some volatility and downside risks, the broader trend of the INR seems to maintain its positive outlook with supportive technical indicators. As the global economic landscape continues to evolve, the Indian Rupee’s resilience and potential for recovery remain key focus areas for investors and market participants.
