The Indian Rupee (INR) edged closer to a fresh record low on Tuesday, pressured by regional currency weakness, outflows of foreign capital, and sustained demand for the US Dollar (USD) from importers and foreign banks. Although the Reserve Bank of India (RBI) has intervened in foreign exchange markets to curb volatility, the local currency remains under strain.
Economic Data in Focus
Investors are now turning their attention to key inflation data. The US Consumer Price Index (CPI) for November, due Wednesday, is expected to be a critical indicator influencing the Federal Reserve’s monetary policy. Markets widely anticipate that the Fed may opt for a third consecutive rate cut if inflationary pressures remain subdued.
In India, CPI inflation data, slated for release on Thursday, will provide insights into domestic price trends. Economists predict the data could play a crucial role in shaping the RBI’s near-term policy direction.
Mixed Signals for the Indian Economy
Economists at Bank of Baroda expressed a cautious outlook for the INR, stating, “We expect INR to trade at current levels with a depreciating bias. The Reserve Bank of India’s measures to attract foreign inflows and the range-bound current account deficit (CAD) should offer medium-term support.”
Meanwhile, India’s forex reserves rose by $1.51 billion to $658.09 billion for the week ending November 29, according to RBI data. Despite the increase, the central bank revised its GDP growth projection for the current fiscal year downward, lowering it from 7.2% to 6.6%.
On the global front, San Francisco Fed President Mary Daly emphasized that the US labor market remains strong, underscoring the Federal Reserve’s readiness to raise rates again if inflationary risks resurface. Financial markets are currently pricing in an 85.8% probability of a 25-basis-point rate cut at the Fed’s December 17–18 meeting, according to the CME FedWatch tool.
USD/INR Outlook Suggests Further Gains
The USD/INR pair continues to trade positively, maintaining levels above the critical 100-day Exponential Moving Average (EMA) on the daily chart. The 14-day Relative Strength Index (RSI) remains elevated near 71.60, signaling overbought conditions, which could lead to a period of consolidation.
Immediate resistance for USD/INR lies at the record high of 84.86, with a sustained break potentially paving the way to the psychological 85.00 mark and further toward 85.50. Conversely, a move below the resistance-turned-support level of 84.61 could invite selling pressure, targeting 84.22 and the 100-day EMA at 84.06.
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