The Indian Rupee (INR) continued to struggle on Wednesday, hovering near its all-time low, as the US Dollar (USD) strengthened and Asian currencies weakened following reports showing Republican candidate Donald Trump leading over Democrat Kamala Harris in the ongoing US presidential race. In addition to this, continued outflows from Indian equities are putting further strain on the local currency.
Despite these challenges, the INR’s decline may be limited by the Reserve Bank of India’s (RBI) usual intervention, with the central bank likely to sell USD to curb significant depreciation of the Rupee. Investors are now awaiting the outcome of the US election and the Federal Reserve’s meeting scheduled for Thursday, with a growing expectation that a Trump victory could push the USD even higher.
Market Insights: Trump’s Lead Strengthens USD, Affects INR
The USD is performing well, with rising US yields and stronger US equity futures fueling optimism around the so-called “Trump trades” as election results start to take shape, said a Singapore-based hedge fund portfolio manager.
Meanwhile, the International Monetary Fund (IMF) projects that India will surpass Japan to become the world’s fourth-largest economy by FY2025, with India’s GDP forecast to reach $4.34 trillion in the next fiscal year.
Economic data from the US also showed positive momentum: the ISM Services Purchasing Managers Index (PMI) rose to 56.0 in October from 54.9 in September, surpassing expectations. However, the S&P Global Services PMI for October came in slightly lower at 55.0, missing the forecast of 55.3.
Financial markets are now factoring in a near 94% chance of a quarter-point interest rate cut by the Federal Reserve, with expectations of another similar move in December, according to CME’s FedWatch tool.
Technical Outlook: USD/INR Continues Bullish Trend
On the technical front, the outlook for the USD/INR pair remains bullish in the long term. The pair is holding above the key 100-day Exponential Moving Average (EMA), with the 14-day Relative Strength Index (RSI) maintaining momentum above the 67.30 mark, indicating continued upside potential.
The immediate resistance for the USD/INR is around 84.25, near the upper boundary of the ascending trend channel. If the pair surpasses this level, it could target 84.50, potentially reaching the psychological 85.00 mark. Conversely, a break below the lower limit of the trend channel at 84.05 could expose further downside, with key support at 83.79 (the 100-day EMA) and 83.46, the low seen on September 24.
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