Indian Rupee Weakening Near Record Low
- The Indian Rupee (INR) is facing pressure as it weakens near its all-time low in Friday’s early European session.
- Negative trends in domestic equities and rising USD demand from importers are contributing to the decline in the INR.
- India is set to release its Federal Fiscal Deficit for October and GDP growth data for Q2 FY25 later on Friday, which will likely impact the currency’s movement.
The Indian Rupee (INR) is experiencing continued weakness near its historical low on Friday. Several factors are playing a role in this decline, including the rise in US Treasury bond yields, month-end USD demand, and Foreign Portfolio Investors (FPIs) selling off domestic equities. Despite these challenges, the Reserve Bank of India (RBI) is expected to intervene in the foreign exchange (forex) market by selling USD to prevent excessive depreciation of the INR amidst global market volatility.
Later today, attention will be on India’s Federal Fiscal Deficit data for October and Gross Domestic Product (GDP) growth figures for the July-September 2024 quarter (Q2 FY25). A stronger-than-expected GDP report could potentially help limit the losses of the INR in the market.
Challenges Facing the Indian Rupee
- Foreign investors withdrew nearly $1.4 billion from Indian equities on Thursday, leading to a 1.5% drop in the BSE Sensex index.
- India’s GDP growth is projected to align with the RBI’s target of 7.0% for the second quarter of FY25.
- Weak consumption is offsetting a strong recovery in government spending, potentially leading to India’s slowest economic growth in one and a half years.
- The RBI is expected to maintain interest rates on December 6 due to a significant rise in consumer inflation.
- Markets are indicating a 66.5% chance of a quarter-point rate cut by the Fed in December.
Long-Term Outlook for USD/INR
The Indian Rupee is currently softening, with the USD/INR pair maintaining a bullish sentiment in the longer term. The price is holding above the key 100-day Exponential Moving Average (EMA) on the daily timeframe, with the 14-day Relative Strength Index suggesting potential support. In the bullish scenario, a breakthrough of the resistance level at 84.50-84.55 could propel USD/INR towards the 85.00 psychological mark. Conversely, a sustained drop below the trend channel’s lower limit of 84.27 may lead to further downside, with support levels at 83.96 and 83.65 to watch.
Indian Rupee FAQs
- Factors Influencing the Indian Rupee: Crude Oil prices, USD value, foreign investment, RBI intervention, and interest rates are key factors.
- RBI’s Role in Stability: The RBI intervenes to stabilize the exchange rate and inflation, which affects the Rupee’s strength.
- Macroeconomic Factors: Inflation, interest rates, GDP growth, trade balance, and foreign investment impact the Rupee’s value.
- Impact of Inflation: Higher inflation can devalue the currency but may also attract international investors due to increased interest rates.
Analysis:
The Indian Rupee’s current challenges are a result of various domestic and global factors, from FPI withdrawals to economic growth concerns. The upcoming data releases will provide further insight into the currency’s trajectory. In the long term, the USD/INR pair’s bullish sentiment indicates potential for further gains, with key resistance and support levels to watch. Understanding the factors influencing the Rupee’s value is crucial for investors and individuals alike, as they navigate the currency market and its implications on their financial decisions and future.