The Indian Rupee (INR) has fallen sharply on Thursday, approaching near historic lows. A notable decline in the Chinese Yuan and increased demand for the US Dollar (USD) from importers and foreign banks have added downward pressure on the INR. Additionally, the recent appointment of Sanjay Malhotra, a career bureaucrat, as the new Governor of the Reserve Bank of India (RBI) has fueled speculation of potential interest rate cuts, further weighing on the Rupee.
Despite the ongoing depreciation, the downside for the INR may be limited, as market participants expect the RBI to intervene in the currency markets. The central bank has a history of stepping in to support the Rupee by selling USD to prevent a sharp fall.
Traders are closely watching upcoming economic data, including the US November Producer Price Index (PPI) and weekly Initial Jobless Claims, due later on Thursday. In India, the release of CPI inflation, Industrial Output, and Manufacturing Output data will also be key focal points.
Rupee Faces Multiple Challenges Amid Rate Cut Expectations and USD Strength
India’s GDP growth forecast for FY26 is estimated to rise to 7%, driven by factors such as a recovery in capital expenditure (capex), increased fiscal spending in FY25, a potential cut in the Cash Reserve Ratio (CRR), and further macro-prudential easing to stimulate credit growth, according to Axis Bank analysts.
Economists at Capital Economics predict a 25 basis point cut in India’s repo rate at Sanjay Malhotra’s first Monetary Policy Committee (MPC) meeting in February, if not sooner. This follows expectations that a rate cut may have come under the leadership of the outgoing RBI Governor Shaktikanta Das, potentially as early as April.
Meanwhile, the US Consumer Price Index (CPI) for November rose to 2.7% year-over-year, slightly up from 2.6% in October. The monthly CPI increase of 0.3% was in line with expectations, while the core CPI, excluding volatile food and energy prices, rose 3.3% YoY. The data supports the view that the Federal Reserve may opt for further rate cuts, with CME’s FedWatch Tool pricing in a roughly 95% probability of a rate reduction at the Fed’s December meeting.
USD/INR Outlook: Bullish Bias Remains in the Longer Term
The USD/INR pair continues to show a positive trend on the daily chart, holding above the key 100-day Exponential Moving Average (EMA), suggesting sustained bullish momentum. The 14-day Relative Strength Index (RSI) is positioned at 67.70, indicating that the current support level is likely to hold rather than break.
Key resistance for USD/INR lies at the psychological level of 85.00, as well as the ascending trend channel. A break above this could open the door for a rally toward 85.50. On the downside, initial support is seen at the lower boundary of the trend channel near 84.70. A sustained decline below this level could target 84.22, the low from November 25, followed by 84.10, which corresponds to the 100-day EMA.
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