In Thursday’s trading session, the Indian Rupee (INR) held a steady position, trading on a flat note as the Greenback experienced a modest decline. According to the Reserve Bank of India’s (RBI) February bulletin, while inflation expectations in India may stabilize, potential renewed pressures from cereals and proteins persist. The bulletin noted a decline in retail inflation to a three-month low of 5.1% in January from 5.69% in December. The RBI, maintaining interest rates and policy stance, reiterated its commitment to achieving the 4% inflation target sustainably.
Concerns over attacks on ships in the Red Sea and expectations of delayed U.S. interest rate cuts led to a rise in oil prices, potentially lifting the safe-haven U.S. Dollar (USD) and capping downside risks for the USD/INR pair.
Investors are keenly awaiting cues from the RBI MPC Meeting Minutes on Thursday. On the U.S. docket, S&P Global PMI, weekly Initial Jobless Claims, Existing Home Sales, and the Chicago Fed National Activity Index will be observed. Additionally, speeches from Fed officials Cook, Kashkari, Jefferson, and Harker are scheduled later in the day.
Indian Rupee Reacts to High Inflation and Geopolitical Tensions
India’s S&P Global Services PMI improved to 62.0 in February, indicating robust growth compared to 61.8 in January.
Manufacturing PMI eased slightly from 56.9 in January to 56.7 in February. The Composite PMI stood at 61.5 in February, surpassing the 61.2 prior.
Indian business activity expanded at its fastest pace in seven months in February, supported by strong demand in both manufacturing and services.
The RBI’s monthly bulletin affirms the sustained momentum in India’s economy, projecting stability and potential rate cuts in the July–September quarter.
Bond issuance since January reached almost half of the total issued in 2023, with net purchases of around 350 billion rupees ($4.22 billion) in 2024.
The RBI anticipates a decrease in India’s debt-to-GDP ratio to 73.4% by 2030-31, surpassing the IMF‘s forecast of 78.2%.
Technical Analysis: Indian Rupee’s Position and Future Prospects
In the realm of technical analysis, the Indian Rupee remains constrained within a longer-term band of 82.70-83.20. The USD/INR pair has maintained a bearish bias in the near term, supported by its position below the key 100-day Exponential Moving Average (EMA) on the daily chart. The 14-day Relative Strength Index (RSI) below the 50.0 midline indicates a downward momentum.
Initial support lies at 82.85, with potential contention near the lower limit of the descending trend channel at 82.70. A bearish breakout could lead to a drop to 82.45. On the upside, a break above the support-turned-resistance near 83.00 may propel USD/INR towards the upper boundary of the descending trend channel at 83.20. Further resistance levels include 83.35 and the psychological level of 84.00. The technical analysis suggests a nuanced landscape for the Indian Rupee in the current market conditions.
