The Indian Rupee (INR) remains stable against the US Dollar (USD), trading within the 84.00-84.10 range on Thursday. The Reserve Bank of India (RBI) has been intervening in the market to limit downside risks for the INR, despite continued outflows from Indian equities. Foreign Institutional Investors (FII) have been net sellers of Indian stocks for the 18th consecutive session, redirecting funds to China due to stimulus measures and more attractive valuations. The Nifty 50 has seen a 1.7% decline over the past three sessions this week and is down approximately 6% from last week’s record highs, impacted by disappointing earnings results.
Indian Prime Minister Narendra Modi and Chinese President Xi Jinping met at the BRICS summit in Russia and agreed to enhance communication and cooperation between India and China. This move aims to resolve ongoing conflicts and improve relations strained by a deadly military clash in 2020. Traders are keeping a close watch on the HSBC Purchasing Managers Index (PMI) data, a key indicator of business activity in India, set to be released on Thursday. Attention will also turn to FX Reserves (USD) data for the week ending October 14, expected to be published on Friday.
The US Dollar has faced downward pressure following the release of the Federal Reserve’s Beige Book, which reported limited economic activity in nearly all Districts, contrasting with August’s report. The CME FedWatch Tool shows an 88.9% probability of a 25-basis-point rate cut, with no expectations of a larger 50-basis-point cut. Former Goldman Sachs economist Jim O’Neill stated that the BRICS group challenging the US Dollar is unrealistic as long as China and India remain divided on trade. In the minutes from the October meeting, the Monetary Policy Committee (MPC) highlighted the need for a cautious approach to lowering interest rates due to inflation concerns.
On the technical side, the USD/INR pair has found support around 84.00, with the 14-day Relative Strength Index (RSI) indicating a bullish bias. Resistance levels are expected at the pair’s all-time high of 84.14, with the potential to test the upper boundary of the ascending channel at 84.20. Immediate support is seen at the nine-day Exponential Moving Average (EMA) near 84.02, coinciding with the lower boundary of the ascending channel.
The Indian Rupee is sensitive to external factors like the price of Crude Oil, the value of the US Dollar, and foreign investment levels. The Reserve Bank of India (RBI) intervenes in forex markets to maintain exchange rate stability and adjusts interest rates to control inflation. Macroeconomic factors such as inflation, interest rates, GDP growth, trade balance, and foreign investment inflows influence the value of the Rupee. Higher inflation can be negative for the Rupee, while higher interest rates and a positive trade balance are beneficial.
