The Indian Rupee (INR) showed signs of resilience on Tuesday, bolstered by a weaker US Dollar (USD). However, the INR faced challenges last Friday, hitting an all-time low of 83.48 amidst broader weakness in Asian currencies and heightened local demand for the USD. Concerns over renewed USD demand and escalating geopolitical tensions in the Middle East and Eastern Europe may exert downward pressure on the INR, limiting its upside potential in the near term.
Upcoming economic data releases in the US, including the Consumer Confidence report, Durable Goods Orders, and the FHFA’s House Price Index, are anticipated to influence market sentiments. Attention will also turn to the US Gross Domestic Product Annualized (Q4) figures on Thursday, which are expected to remain steady at 3.2%, along with the Personal Consumption Expenditures Price Index (PCE) data for February. Additionally, the Indian Current Account data is scheduled for release on Thursday, adding to market volatility.
In a positive development, India’s foreign exchange reserves surged to a record high of $642.49 billion for the week ending March 15, supported by the maturity of a $5 billion Dollar/Rupee swap that matured on March 11. Furthermore, India’s Gross Domestic Product (GDP) growth estimate for the current fiscal year has been revised upwards to 7.6%, indicating the strength of the Indian economy.
The Reserve Bank of India (RBI) is expected to maintain the repo rate at 6.50% until the end of Q2 2024, with potential interest rate cuts of 25 basis points (bps) anticipated in Q3 2024.
On the international front, US economic indicators such as February New Home Sales, which fell 0.3% MoM, and the Dallas Fed Manufacturing Survey, declining to -14.4 in March, may impact market sentiments.
Technical analysis suggests that the Indian Rupee continues its longer-term uptrend, with USD/INR maintaining bullish momentum after breaking above a multi-month descending trend channel last week. In the near term, the pair remains supported above the key 100-day Exponential Moving Average (EMA) on the daily chart, with the 14-day Relative Strength Index indicating potential for further USD/INR appreciation.
Key resistance levels for USD/INR include the all-time high of 83.49 and the psychological level of 84.00. Conversely, initial support is expected at 83.20, with a critical support zone at the confluence of the 100-day EMA and the 83.00 mark.
