The Indian Rupee (INR) experienced a decline on Tuesday, weighed down by persistent foreign outflows from domestic stocks and increasing US bond yields amid growing speculation about Donald Trump’s potential victory in the upcoming presidential election. However, a drop in crude oil prices may provide some support for the local currency. The Reserve Bank of India (RBI) is expected to intervene by selling US Dollars through public sector banks to mitigate significant depreciation of the INR.
Traders are closely watching key US economic data releases this week, including the advanced Gross Domestic Product (GDP) for the third quarter, the Personal Consumption Expenditures (PCE) Price Index for September, and the highly anticipated Nonfarm Payrolls (NFP) report.
Market Update: Indian Rupee Faces Multiple Headwinds
A. Prasanna, head of research at ICICI Securities Primary Dealership, noted, “In the run-up to and immediate aftermath of U.S. elections, the RBI’s aim will be to curb volatility in the rupee.” Foreign investors have pulled approximately $10 billion from India’s equity and debt markets in October, marking the most significant month of selling this year.
Nomura reported on Monday that the Indian economy has entered a phase of “cyclical growth slowdown,” suggesting that the RBI’s forecast of a 7.2% GDP expansion is “overly optimistic.” The RBI has projected growth rates of 7.0% for Q2, and 7.4% for both Q3 and Q4 in FY25. The Department of Economic Affairs estimates the Indian economy will expand between 6.5% and 7.0% in the current financial year.
According to the CME FedWatch tool, traders are anticipating a 96.8% probability of a typical 25 basis point rate cut in November, with expectations for a similar move in December.
Technical Analysis: USD/INR Maintains Constructive Long-Term Outlook
On the technical front, the Indian Rupee continues to trade softer. The USD/INR pair maintains a bullish sentiment, trading above the critical 100-day Exponential Moving Average (EMA) on the daily chart. The upward momentum is bolstered by the 14-day Relative Strength Index (RSI), which hovers above the midline at approximately 60.15, suggesting that support levels are likely to hold.
If bullish candlestick patterns persist and trading remains above the upper boundary of the ascending trend channel around 84.22, the USD/INR pair may rise to 84.50, potentially reaching the psychological level of 85.00. Conversely, if the pair consistently trades below the trend channel’s lower limit near 84.05, a decline to 83.76, the 100-day EMA, could occur.
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