Indian Rupee Softens Amid USD Demand and Position Unwinding

  • Indian Rupee loses momentum: The INR weakens on Friday due to increased demand for the US Dollar from importers for month-end payments and the likely unwinding of long positions.
  • Favorable factors: Despite the pressure on the INR, falling crude oil prices and a strong performance in Indian equities could help limit the currency’s losses.

Key Economic Indicators to Watch

  • US PCE Price Index: Investors are closely monitoring the release of the US August Personal Consumption Expenditures (PCE) Price Index, a key inflation indicator for the Fed.
  • Expected data: The forecast suggests a 2.3% year-on-year increase in the headline PCE and a 2.7% rise in the core PCE for August.
  • Michigan Consumer Sentiment Index: The release of this index for September will also provide valuable insights into consumer sentiment.

Market Insights and Analysis

  • USD/INR dynamics: The dollar-rupee pair has seen fluctuations throughout the week, with importers driving demand for the USD towards month-end payments.
  • Equity market performance: India’s Sensex and Nifty hit record highs, reflecting positive sentiment in the stock market.
  • US economic data: Durable Goods Orders remained flat in August, while the GDP growth rate for Q2 was in line with previous estimates.
  • Fed’s stance: Fed Governor Lisa Cook supported the recent interest rate cut as a response to growing risks to employment.

Technical Analysis and Forecast

  • USD/INR outlook: The pair maintains a bearish view on the daily chart, with key resistance levels identified.
  • Support and resistance levels: The low of September 23 acts as initial support, while a break above the 100-day EMA could signal further upside potential.

Indian Rupee FAQs

  • External factors: The INR is influenced by factors such as crude oil prices, USD value, foreign investment, RBI interventions, and interest rates.
  • RBI interventions: The RBI intervenes in forex markets to maintain exchange rate stability and adjust interest rates to control inflation.
  • Macroeconomic factors: Inflation, interest rates, GDP growth, trade balance, and foreign investment inflows all impact the value of the Rupee.
  • Inflation impact: Higher inflation can be negative for the currency, while lower inflation may have a positive effect on the Rupee.
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