The Indian Rupee (INR) gained strength on Monday, defying the trend of a stronger US Dollar (USD). This appreciation is attributed to expectations of continued policy reforms following India’s general election results, a positive economic growth outlook, and substantial foreign investments into Indian markets.
Despite these gains, robust US Purchasing Managers Index (PMI) data and a cautious stance from the US Federal Reserve (Fed) are expected to bolster the USD, potentially exerting upward pressure on the USD/INR exchange rate. Additionally, rising crude oil prices continue to challenge the INR, given India’s status as the world’s third-largest crude oil consumer.
Key economic indicators and events scheduled for Monday include the US Chicago Fed National Activity Index for May, the Dallas Fed Manufacturing Business Index for June, and a speech by Fed official Mary Daly.
Market Movers: Indian Rupee Gains Traction Amid Positive Factors
On Friday, the Reserve Bank of India (RBI) released the Monetary Policy Committee (MPC) minutes, emphasizing the need for active disinflationary policies to steer inflation towards target levels. RBI Governor Shaktikanta Das highlighted that food inflation remains a significant challenge due to recurring supply-side shocks.
India’s economic data showed a rise in the HSBC Manufacturing PMI to 58.5 in June from 57.5 in May, while the Services PMI increased to 60.4 from 60.2, surpassing market expectations of 60.0.
Foreign inflows into Indian bonds are anticipated to reach a decade-high of $2 billion around June 28, when these bonds will be included in a widely-followed JPMorgan index. However, bankers indicated that the RBI would absorb most of the USD to mitigate volatility in the INR.
In the US, the flash S&P Composite PMI rose to 54.6 in June from 54.5 in May, with the Manufacturing PMI increasing to 51.7 from 51.3, and the Services PMI improving to 55.1 from 54.8, all exceeding expectations. However, US Existing Home Sales in May fell to 4.11 million from 4.14 million in April, representing a 0.7% month-over-month decline.
Technical Analysis: USD/INR Maintains Long-Term Strength
Despite the INR’s daily gains, the USD/INR pair maintains a bullish outlook on the daily chart, staying above the crucial 100-day Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI) remains above the 50-midline, indicating robust support levels.
The all-time high of 83.75 serves as immediate resistance, with potential to reach the psychological level of 84.00 if upward momentum continues. On the downside, initial support for USD/INR is at 83.43, the low of June 20, with critical support in the 83.30-83.35 zone, representing the resistance-turned-support level and the 100-day EMA.
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