The Indian Rupee (INR) continued its downward trajectory on Tuesday, reaching a new all-time low following a decline in the previous session. The local currency is facing pressure from ongoing foreign outflows in the equity markets as institutional investors react to uncertainty surrounding the upcoming US presidential election and the US Federal Reserve’s interest rate decision scheduled for Thursday.
Despite these challenges, potential foreign exchange intervention by the Reserve Bank of India (RBI)—selling US Dollars (USD)—could help mitigate further losses for the INR. As investors await the election outcome, which may take days to determine, all eyes are also on the Fed‘s monetary policy meeting.
According to the latest data, the HSBC final India Manufacturing Purchasing Managers Index (PMI) improved to 57.5 in October, up from an eight-month low of 56.5 in September, exceeding the preliminary estimate of 57.4. Pranjul Bhandari, chief India economist at HSBC, noted, “India’s headline manufacturing PMI picked up substantially in October as the economy’s operating conditions continue to broadly improve.”
Market sentiments are influenced by opinion polls indicating that Vice President Kamala Harris may be leading in several swing states, prompting some profit-taking on bets associated with former President Donald Trump, as observed by Kenneth Broux, head of corporate research FX and rates at Societe Generale.
The International Monetary Fund (IMF) has projected that India will surpass Japan as the world’s fourth-largest economy by FY2025, estimating India’s GDP to reach $4,340 billion in the next fiscal year.
In financial markets, there is an almost 98% expectation of a quarter-point interest rate reduction by the Fed, with nearly an 80% chance of a similar move in December, according to the CME FedWatch Tool.
Technical Analysis: The USD/INR pair maintains a positive outlook despite the INR’s weakness. The daily chart indicates that the pair is well-supported above the key 100-day Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI) is above the midline at 65.20, suggesting favorable conditions for further gains.
Immediate resistance for USD/INR is identified at the upper boundary of the ascending trend channel at 84.25. A decisive bullish candlestick above this level could lead the pair towards 84.50 and potentially reach the psychological level of 85.00.
Conversely, a drop below the lower limit of the trend channel near 84.05 could trigger bearish pressure, potentially pushing the pair down to 83.78, which aligns with the 100-day EMA.
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