The Indian Rupee (INR) exhibited strength on Tuesday, supported by anticipated equity inflows and US Dollar (USD) sales by state-run banks. Latest data from India’s economic indicators revealed that the HSBC Manufacturing Purchasing Managers Index (PMI) for April remained steady at 59.1, consistent with the March figure, while the Services PMI increased to 61.7 from 61.2 in the previous reading. Despite the mixed PMI data, the INR maintained a modest upward trend.
Furthermore, the recovery of the INR was reinforced by the decline in oil prices, stemming from diminishing concerns regarding a potential escalation of conflict in the Middle East.
However, Arnob Biswas, head of foreign exchange research at SMC Global Securities, cautioned that the upside potential for the local currency may be short-lived due to the ongoing hawkish repricing of US Federal Reserve rate cut expectations, which is expected to bolster the USD.
Investor attention remains focused on the US S&P Global PMI for April, scheduled for later in the day, and the final reading of the US March Personal Consumption Expenditures Price Index (PCE) on Friday. Stronger-than-anticipated US economic data could fuel speculation of a delay in the Fed‘s rate cut cycle, thereby strengthening the Greenback.
Market Outlook: Indian Rupee Rebounds Amid Lower Crude Oil Prices
On the commodity front, Brent crude oil prices retreated by 0.7% to $86.70 a barrel on Monday, providing a favorable backdrop for the Indian economy. Indian stocks saw gains, with the BSE Sensex and Nifty 50 indices rising by approximately 0.8% and 0.9%, respectively.
Maintaining the momentum of economic growth at 7% for the fiscal year 2024–25 and beyond is deemed feasible, supported by favorable monsoon conditions, increased agricultural output, and enhanced global trade, as stated by Shashanka Bhide, a member of the RBI Monetary Policy Committee (MPC).
In a positive development, the International Monetary Fund (IMF) revised India’s growth forecast to 6.8% for 2024, up from its January projection of 6.5%. Similarly, the Asian Development Bank (ADB) raised its GDP growth forecast for India for the current fiscal year to 7% from the previous estimate of 6.7%.
The minutes of the RBI monetary policy meeting underscored the commitment of Indian policymakers to maintaining higher interest rates for an extended period to ensure sustainable inflation reduction.
Technical Analysis: USD/INR Retains Bullish Bias
The Indian Rupee weakened marginally during the trading session. The USD/INR pair maintains a bullish stance on the daily timeframe, holding above the key 100-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) indicates potential for further consolidation before any near-term depreciation of USD/INR.
In terms of resistance levels, the pair faces initial barriers near the April 15 high of 83.50, followed by the all-time high of 83.72. Continued bullish momentum could propel the pair towards the psychological level of 84.00. Conversely, support levels are identified near the April 11 low of 83.30, with further downside potential towards the 100-day EMA at 83.12 and the January 15 low of 82.78.
