The Indian Rupee (INR) dropped to a fresh all-time low on Monday, following disappointing economic data and growing concerns about foreign investment outflows. The HSBC India Manufacturing Purchasing Managers Index (PMI) for November fell to 56.5, down from the previous 57.5 and below the market consensus of 57.3, signaling a slowdown in the manufacturing sector and putting additional pressure on the INR.
The INR’s weakness has been exacerbated by the strength of the US Dollar, spurred by the election of Donald Trump as US President and his policies, including threats of 100% tariffs on BRICS nations, which include India, if they proceed with plans to replace the US Dollar with a new common currency. Trump’s comments have added to concerns about the global economy and further strained the Indian currency.
In addition, India’s GDP growth for the July-September quarter came in at 5.4%, the lowest in seven quarters, well below the Reserve Bank of India’s (RBI) forecast of 6.8%. This slowdown is fueling fears of continued foreign fund outflows, which could further weaken the INR. Foreign investors net sold $2.5 billion in Indian stocks in November, following $11 billion in outflows during October.
As investors await key US and Indian economic data, including the US ISM Manufacturing PMI and the Reserve Bank of India’s interest rate decision on Friday, the outlook for the INR remains uncertain. Analysts at Goldman Sachs expect the RBI to keep interest rates unchanged but express caution about inflation and growth prospects.
From a technical perspective, the INR remains vulnerable as the USD/INR pair stays above the key 100-day Exponential Moving Average (EMA). The pair’s upward momentum is supported by bullish indicators, with the potential to reach the 85.00 psychological level. However, any bearish movement below the trend channel’s lower limit could push the pair toward the 83.96 mark, with further downside possible if selling pressure intensifies.
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