The Indian Rupee (INR) continues to decline in Thursday’s Asian session, despite a weaker US Dollar (USD). The INR hit an all-time closing low on Wednesday due to the Indian government’s decision to raise capital gains tax on equity investments and equity derivative trades. This move dampened market sentiment and led to a sell-off in Indian equities. The INR may face further pressure from weak investor appetite for riskier assets and increased demand for the Greenback. However, factors such as lower crude oil prices and potential intervention from the Reserve Bank of India (RBI) could help limit the currency’s losses.
Looking ahead, the highlight for Thursday will be the first reading of the US Gross Domestic Product (GDP) for the second quarter. Investors will also focus on the Personal Consumption Expenditures (PCE) Price Index data for June on Friday. Any indications of subdued inflation could raise expectations for a rate cut by the US Federal Reserve (Fed) and potentially weaken the USD.
Market Update: Indian Rupee Struggles Despite Stronger PMI Readings
- Benchmark Indian equity indices extended losses for a fourth consecutive session, with the BSE Sensex falling 280 points and the Nifty 50 dropping 65 points on Wednesday.
- India’s HSBC Manufacturing PMI data for July improved to 58.5, while the Services PMI climbed to 61.1.
- In the US, the S&P Global Composite PMI increased to 55.0 in July, while the Goods Trade Balance came in at $-96.0 billion in June.
- The preliminary US GDP for the second quarter is estimated to grow at an annualized rate of 2.0%, higher than the previous quarter.
Technical Analysis: INR Vulnerable in the Longer Term
The USD/INR pair continues to trend higher, supported by a bullish structure on the daily chart. The pair is currently above the key 100-day Exponential Moving Average (EMA) and the 14-day Relative Strength Index (RSI) suggests room for further upside. The next upside target is the all-time high of 83.79, with a potential push towards the 84.00 level. On the downside, a break below 83.65 could lead to a drop to 83.51 and further support at 83.42.
Overall, the Indian Rupee’s weakness is driven by external factors such as capital gains tax hikes and global economic data. Investors should monitor US GDP and inflation data for potential impacts on currency markets. Understanding these factors can help individuals make informed decisions about their finances and investments.