The Indian Rupee (INR) weakened on Thursday, impacted by strong demand for the US Dollar (USD) from importers and continued foreign equity outflows. The INR’s decline comes despite mixed signals from recent economic data. The preliminary HSBC India Manufacturing Purchasing Managers Index (PMI) fell to 57.9 in August from 58.1 in July, while the Services PMI slightly increased to 60.4 from 60.3. These mixed PMI reports had a muted effect on the INR.
However, a potential decline in crude oil prices may offer some support to the INR, given India’s status as the world’s third-largest oil consumer and importer. Additionally, intervention by the Reserve Bank of India (RBI), which may sell USD to stabilize the INR, could limit further depreciation.
Traders are awaiting the RBI Monetary Policy Committee (MPC) Minutes scheduled for Thursday. In the US, the preliminary S&P Global PMI for August is set to be released, and expectations of a Federal Reserve interest rate cut in September could weaken the USD further.
Market Insights:
“India’s flash composite PMI fell slightly in August but remains well above historical averages,” commented Pranjul Bhandari, HSBC’s chief India economist. Bhandari noted that while new order growth in manufacturing has slowed to its weakest pace since February, demand remains strong and market conditions favorable.
The INR has depreciated by 0.2% against the USD in August, making it the worst-performing currency in Asia. Amit Pabari, managing director at FX advisory firm CR Forex in Mumbai, highlighted persistent challenges for the INR, including a widening trade deficit, ongoing foreign outflows, and sustained USD demand from importers.
The Federal Reserve’s July meeting minutes, released Wednesday, suggested a likely rate cut in September if economic data remains consistent. Markets are anticipating a total of one percentage point in rate cuts by year-end.
Technical Analysis:
The USD/INR pair maintains a bullish outlook on the daily charts, supported above the key 100-day Exponential Moving Average (EMA). The pair remains above an 11-week uptrend line, and the 14-day Relative Strength Index (RSI) suggests potential for further gains.
Resistance for USD/INR is at the psychological level of 84.00, with potential upward movement toward the record high of 84.24 and the 84.50 mark. On the downside, initial support is at the August 20 low of 83.77, with further losses potentially testing the 100-day EMA at 83.56 and the June 28 low of 83.36.
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