The Indian Rupee (INR) continued to face downward pressure on Tuesday, following a fresh all-time low in the previous session. Weak domestic economic data, sustained foreign fund outflows, and increased demand for the US Dollar (USD) have all contributed to the Rupee’s struggles. Adding to the strain, US President-elect Donald Trump threatened on Saturday to impose a 100% tariff on BRICS nations if they undermine the USD, a move that could further impact the INR.
Despite the mounting challenges, the Reserve Bank of India’s (RBI) routine market interventions may limit the Rupee’s decline. Traders are keeping a close watch on the US JOLTs Job Openings report for October, due later today, as well as remarks from Federal Reserve officials Adriana Kugler and Austan Goolsbee. Key events later this week, including the RBI’s interest rate decision and the US Nonfarm Payrolls data for November, are also expected to drive market sentiment.
Economic Data and Market Movements
The HSBC India Manufacturing Purchasing Managers’ Index (PMI) dropped to 56.5 in November, from 57.5 in October, falling short of the market consensus of 57.3. Despite this, Pranjul Bhandari, Chief India Economist at HSBC, noted that the PMI still reflects growth, driven by strong international demand, particularly a four-month high in new export orders.
In addition, India’s foreign exchange reserves fell by USD 1.31 billion to USD 656.58 billion for the week ending November 22, according to the RBI. In contrast, US manufacturing data showed improvement, with the ISM Manufacturing PMI rising to 48.4 in November, up from 46.5 in October, though it still indicated contraction.
Fed Officials Weigh in on Rate Cuts
US Federal Reserve officials have sparked interest in potential interest rate cuts, with Governor Christopher Waller expressing support for a rate reduction at the Fed’s upcoming meeting on December 17-18. However, he noted that forthcoming data could influence the decision. Similarly, Atlanta Fed President Raphael Bostic has yet to decide whether a rate cut is necessary, stating that more data is needed before he can make a determination.
Technical Outlook for USD/INR
The USD/INR pair has maintained a strong bullish trend, holding above the key 100-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) indicates an overbought condition near 75.15, suggesting potential consolidation before further appreciation. The 85.00 level remains a significant barrier for bulls, with a sustained break above it potentially triggering further upward momentum toward 85.50.
On the downside, if the pair faces rejection at the 84.55 resistance-turned-support level, it could fall to 84.22, the low of November 25. Further support lies at 83.98, the 100-day EMA.
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