The Indian Rupee (INR) encountered resistance on Monday, despite a weakened US Dollar (USD) and declining crude oil prices. Speculation surrounding the US Federal Reserve’s (Fed) stance on interest rates adds to the uncertainty, with expectations shifting towards a potential delay in rate cuts until September due to persistent inflation exceeding the Fed’s 2% target.
In contrast, analysts at Morgan Stanley anticipate that the Reserve Bank of India (RBI) will maintain interest rates throughout the current financial year, buoyed by India’s robust economic growth. This stance may offer support to the INR and limit the upside of USD/INR. However, factors such as rising US Treasury bond yields and a rebound in oil prices could exert downward pressure on the local currency.
Looking ahead, investors will closely monitor key US economic indicators, including the ADP Employment Change, ISM Manufacturing PMI, and the Federal Open Market Committee (FOMC) interest rate decision. Additionally, attention will be on India’s HSBC Manufacturing PMI for April.
Despite global uncertainties, Deloitte India remains optimistic, projecting India’s GDP growth at 6.6% for the current fiscal year, driven by consumption expenditure, exports, and capital flows. The Department of Economic Affairs under the Finance Ministry echoes this sentiment, noting strong economic performance across sectors.
In the US, the Personal Consumption Expenditures (PCE) Price Index rose by 2.7% year-on-year in March, exceeding market expectations. The Core PCE, excluding volatile food and energy prices, maintained strength at 2.8% year-on-year.
Technical analysis suggests a constructive outlook for USD/INR in the longer term, with the pair above the key 100-day Exponential Moving Average (EMA) and the 14-day Relative Strength Index (RSI) indicating bullish momentum. Key resistance levels lie at 83.50 and 83.72, while support is observed at 83.23 and 83.10–83.15, with further downside potential to 82.78.
