On Thursday, the Indian Rupee (INR) saw a modest rebound, recouping some of its recent losses. The currency had hit a record low on Wednesday, primarily driven by concerns over escalating tensions in the Middle East, which raised fears of potential disruptions in oil supplies, consequently pushing up oil prices. As India stands as the third-largest consumer and importer of crude oil, any surge in oil prices poses a threat to the economy, placing downward pressure on the INR. Additionally, the growing anticipation that the Federal Reserve (Fed) might postpone rate cuts provided support to the Greenback, thereby exerting upward pressure on the USD/INR pair. However, the pair’s further upside potential could be curtailed by potential interventions from the Reserve Bank of India (RBI) aimed at preventing excessive depreciation of the local currency.
Market participants are closely monitoring several key indicators, including the weekly Initial Jobless Claims, the Philly Fed Manufacturing Index, and Existing Home Sales, scheduled for release on Thursday. Furthermore, speeches by Fed officials Bowman, Williams, and Bostic are anticipated later in the day. On Friday, attention will turn to the release of the RBI Monetary Policy Committee (MPC) Meeting Minutes.
Notably, Reuters reported that the RBI likely intervened in the foreign exchange market on Tuesday by selling Dollars via state-run banks to stem the INR’s losses, prompted by a selloff in Asian equities and currencies.
Concerns regarding the Indian economy’s growth trajectory have also emerged, with the United Nations Trade and Development (UNCTAD) forecasting a deceleration in growth to 6.5% in 2024, down from the 6.7% recorded in the previous year.
Meanwhile, statements from Federal Reserve officials have contributed to market sentiment. Fed Cleveland President Loretta Mester highlighted higher-than-expected inflation and emphasized the need for the Fed to gain more confidence in its trajectory. Fed Governor Michelle Bowman noted a potential slowdown in inflation progress and described current monetary policy as restrictive, while Fed Chair Jerome Powell signaled a willingness to wait longer than anticipated before considering rate cuts, citing unexpectedly strong inflation data.
In terms of technical analysis, the USD/INR pair maintains a bullish stance, supported by its position above the key 100-day Exponential Moving Average (EMA) on the daily chart and a positive 14-day Relative Strength Index (RSI). Immediate resistance is seen at 83.72, with further upside potentially targeting the psychological barrier of 84.00. On the downside, initial support lies around 83.30, followed by a critical level at 83.00–83.10, encompassing the round figure and the 100-day EMA.
In today’s trading, the US Dollar exhibited varied performance against major currencies, with the Canadian Dollar emerging as the strongest counterpart.
