The Indian Rupee (INR) continued its upward trajectory on Wednesday, defying renewed demand for the US Dollar (USD). This resurgence from record-low levels finds support in the interventions likely carried out by the Reserve Bank of India (RBI), aimed at stabilizing sharp fluctuations in the INR.
India’s robust economic performance amidst a backdrop of global economic slowdown and geopolitical tensions stands out prominently. The Ministry of Finance’s monthly economic review report indicates a positive outlook, with foreign portfolio investors turning net buyers in February and Foreign Direct Investment (FDI) inflows anticipated to accelerate. These factors are expected to bolster the INR and mitigate upside pressure on the USD/INR exchange rate.
Investors await key economic indicators from the United States, including the Gross Domestic Product Annualized (Q4) on Thursday, with forecasts suggesting a steady growth rate of 3.2%. Attention will also be on Friday’s release of the US February Personal Consumption Expenditures Price Index (PCE) data, although markets will be closed for Good Friday.
Market movements highlight India’s favorable economic indicators, including a narrowed Current Account Deficit to $10.5 billion in Q4 2023, down from $11.4 billion previously, representing 1.2% of Gross Domestic Product (GDP). S&P Global’s upward revision of India’s GDP growth forecast for FY25 to 6.8%, albeit lower than the RBI’s projection of 7%, further contributes to the positive sentiment. Additionally, S&P anticipates a 75 basis points rate cut by the RBI by the end of the fiscal year.
In the United States, the Conference Board’s Consumer Confidence dipped slightly, while Durable Goods Orders for February exceeded expectations, rising by 1.4% following a 6.9% decline in January. Furthermore, comments from Federal Reserve officials indicate differing views on rate cuts, with Atlanta Fed President Raphael Bostic advocating for a single rate cut in 2024, while Chicago Fed President Austan Goolsbee suggests three cuts, contingent upon progress in inflation and adherence to the Fed’s dual mandate.
Technical analysis of the Indian Rupee suggests a rebound, albeit with limited upside potential. USD/INR maintains a bullish outlook in the longer term, having breached a multi-month descending trend channel recently. In the short term, the pair remains above the key 100-day Exponential Moving Average (EMA) on the daily chart, with the 14-day Relative Strength Index indicating a positive outlook. The primary upside barrier lies at 83.49, with further resistance at the psychological level of 84.00. Conversely, support levels are observed at 83.20 and 83.00, marked by the 100-day EMA.
