Indian Rupee Holds Steady Amid Mixed Data
The Indian Rupee (INR) remains stable in Friday’s early European session after reaching an all-time low of 84.50 against the US Dollar (USD) in the previous session. The latest data released on Friday showed that the HSBC India Manufacturing Purchasing Managers Index (PMI) eased to 57.3 in November from the previous reading of 57.5. On the other hand, the Indian Services PMI improved to 59.2 in November from 58.5 in October. The local currency’s reaction to the mixed PMI data has been flat so far.
Factors Affecting the INR
- The significant sell-off in domestic equity markets
- Rebound in crude oil prices due to escalating geopolitical tensions between Russia and Ukraine
- Continued outflow of foreign funds
- Routine intervention from the Reserve Bank of India (RBI)
Despite the challenges, the RBI’s intervention and state-run banks offering USD in the market may help limit the INR’s losses. Traders are closely watching the flash US S&P Global Purchasing Managers Index (PMI) data and the final Michigan Consumer Sentiment report, both scheduled to be published later on Friday.
Analysis of Indian Rupee Vulnerability
- RBI Governor Shaktikanta Das emphasizes the importance of managing inflation while focusing on sustainable economic growth.
- Portfolio outflows, persistent USD demand, and concerns about an economic slowdown may lead to gradual depreciation of the INR.
- US economic indicators, such as Initial Jobless Claims and Existing Home Sales, impact global currency movements.
- Comments from Chicago Fed President Austan Goolsbee hint at potential changes in Fed rate cuts based on inflation trends.
USD/INR Outlook and Key Levels
The USD/INR pair is currently trading flat, capped under an ascending trend channel. Despite this, the overall outlook remains bullish as the price holds above the key 100-day Exponential Moving Average (EMA) on the daily chart. However, a bearish RSI divergence indicates potential selling pressure.
The key levels to watch are:
- Resistance at 84.50 and 85.00
- Support at 84.36, 84.00, and 83.90
RBI FAQs
Here are some frequently asked questions about the Reserve Bank of India (RBI) and its role in the economy:
- The RBI’s primary goal is to maintain price stability while promoting economic growth.
- The RBI adjusts interest rates at bi-monthly meetings to control inflation and support the Rupee.
- The RBI intervenes in FX markets to manage exchange rate volatility for importers and exporters.