The Indian Rupee (INR) remains under pressure on Monday after hitting a historic low of 81.00 in the previous session, as it faces multiple headwinds. The stronger US Dollar (USD), driven by month-end demand, as well as uncertainties surrounding the incoming Trump administration, India’s slowing economic growth, and a widening trade deficit are contributing to the downward pressure on the INR.
The Reserve Bank of India (RBI) has stepped in to limit the rupee’s losses by selling USD, which may offer temporary relief. However, with the year-end approaching, market activity is expected to be subdued and range-bound. Later on Monday, traders will be watching India’s Fiscal Deficit data, while on Tuesday, the Indian Trade Deficit for Q3 and Infrastructure Output data for November will be released.
Rupee Volatility and Market Outlook
“Rupee volatility seems to be back, and we should expect larger movements in the USD/INR pair going forward,” said Anil Bhansali, head of treasury at Finrex Treasury Advisors. A currency dealer at a mid-sized private bank noted that the RBI’s intervention has led to the flushing out of excessive positions in the market.
Foreign portfolio investors have pulled out over $10 billion from Indian stocks and bonds this quarter, according to stock depository data. India’s economy is forecast to grow around 6.5% in fiscal year 2024/25, at the lower end of its 6.5%-7% growth projection, the government reported on Thursday. Deloitte also predicts a slight expansion to 6.7%-7.3% in FY2026, supported by strong domestic consumption.
USD/INR Outlook Remains Bullish
Despite the recent weakness, the USD/INR pair continues to hold above the key 100-day Exponential Moving Average (EMA), indicating that bulls are still in control of the medium-term trend. However, further consolidation is possible before any sustained upward movement, as the 14-day Relative Strength Index (RSI) shows an overbought condition at 76.10.
If the bulls manage to break through the upper boundary of the ascending channel at 85.35 and maintain upward momentum, it could trigger further buying, pushing the pair toward 85.50, with the psychological level of 86.00 in sight. Conversely, if bearish momentum takes hold, the pair could move toward the crucial support zone around 85.10-85.00, where the trend channel’s lower boundary intersects with the round mark. A break below this level could lead to a decline to 84.30, near the 100-day EMA.
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